If you live in a property owned by your partner we consider whether this would be treated as your asset and therefore whether equity would have to be released if you carry out an Individual Voluntary Arrangement (IVA).

If you are a home owner you will almost certainly have to agree to try and release equity from your property as part of an IVA. However if you are living in a property which is owned entirely by your spouse or partner then on the face of it the property is not your asset and the equity does not belong to you.

Because your partner cannot be held responsible for paying your debt it should therefore follow that  any equity in their property will not be available to your creditors as part of your IVA. We explain whether this is always the case.

Have you developed an interest in the property?

Even though your partner’s property is not your asset on paper, if you are planning to go ahead with an IVA you have to consider whether there could be any question of you having a claim on it which could be enforced if you were declared bankrupt. If this were the case, then your creditors could demand the same treatment if you propose an IVA.

There are a number of things that will be considered when trying to establish whether you have indeed built up an ownership claim in the property. The first is how long you have been living with your partner in their property.

If you have only been living with them for a short while then even if you have helped them with their mortgage payments or property upkeep, it is unlikely that you will have built up any realisable claim on the property.

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Have you paid towards the mortgage?

The other area to consider carefully is whether or not you have contributed directly towards the mortgage or the property’s upkeep.

If you have given money to your partner or spouse which could be argued has been used directly to pay the mortgage or if you have paid to maintain the property or have invested in it in another way, then there is a stronger argument that you have developed an interest which should then be available to your creditors.

Equally, if instead of directly paying towards the mortgage or home upkeep, you have
supported your partner or spouse’s living expenses thus allowing them to maintain their mortgage payments, it could again be argued that you have by default built up an interest in the property.

Of course, any contributions you have made in this way also have to be viewed in the context of the time you have been doing them.

If you have only recently started supporting your partner, then it may be reasonable to argue that you have not developed an interest in their property. However, if you have been supporting them in this way for a number of years, this argument will be far more difficult to make.

Giving up your interest in the property

Ultimately, the benefit of arguing that you have no interest in your partner’s property is that you can then ignore any value in it for the purposes of your IVA.

Clearly this will allow you to avoid the possibility of having to release equity and pay a higher return to your creditors which may be well and good as far as you and your partner are concerned. However, you also need to understand the wider implications.

At a later date if you were to consider splitting from your partner, any claim you then believe you have on their property as part of the separation could then be thrown out by a court.

It would be likely that your partner would argue successfully that you have previously provided a legally binding statement (your IVA) confirming that you have no interest in the property.

Understand the implications of IVA

If you are living with your partner in their property, you need to understand the implications of this if you are considering an IVA.

The basic rule is that your creditors are not entitled to any assets which are not yours as no third party can be forced to pay debt on your behalf. As such, your partner’s property should not come into question.

However if you have been contributing to the mortgage or upkeep of the property, particularly if you have been doing so for a considerable period of time, you will need understand that an insolvency practitioner (IP) will need to question this before your IVA application is presented to your creditors.

If you have truly developed an interest in the property then you may well have to acknowledge this and offer your creditors suitable compensation as part of your IVA offer.