Will I need to change bank accounts in an IVA?

In an IVA you will need a 'Basic Bank Account'

We receive a lot of calls and emails from the public asking; "Will I need to change bank accounts in an IVA?".

An IVA will affect on your credit rating so you will need to change your everyday bank account to a 'Basic Bank Account'. A new bank account is needed as a matter of urgency as the IVA monthly contributions must be paid from a bank account that is in the client’s actual name.

You will NOT need to change bank account in an IVA if:-

You have an account with a bank that you don't owe any money to. However, if you do owe your bank money, as either a credit card, overdraft, or loan, it is probable you may need to change/create a new account with a separate bank.

When opening your account, if they do ask questions about your IVA proposal, tell the truth. You need to open an account at a bank you do not have any outstanding debt with.

It is better that you open an account at a bank that is not one of your listed creditors or is affiliated with them. Be careful as some financial houses may be owned/run by the same company. To avoid any problems, you will need to make a list of the accounts available to you and find out which banks are affiliated with other finance houses.

Please note that if you are overdrawn on your current account you will most likely be advised to include that overdrawn balance with your other IVA creditors. If this is the case you will need to change bank accounts in an IVA.

IVA and Basic Bank Accounts

If you are in an IVA then you can still a bank account. Most people in IVAs use bank accounts called 'basic bank account'.

If you are considering an IVA then we advise opening up a new basic bank account with an creditor you are not in debt with or one who is not on your IVA creditors list.

When you are in an IVA you are not supposed to incur further debt or apply for credit. A basic bank account for someone with an IVA is one which just offers basic banking facilities with no overdraft facility or other type of lending facility.

Basic bank accounts allow you to pay in your wages, benefits, tax credits and state pension. They give you a cash card to withdraw your money and some offer standing orders and direct debits. Unlike normal bank accounts, they do not give you a cheque book or overdraft facility.

Basic bank accounts also appeal to people who are worried about over spending, as they do not give you an overdraft. Therefore, you can only spend what is available in your account. However, you still need to keep an eye on your account balance if you have standing orders or direct debits set up. If there is not enough money in your account to pay these, they will be rejected and you will be charged.

Basic bank accounts were set up through a government scheme to help poorer families and those who have problems opening a normal bank account. The scheme is aimed at everyone access to banking facilities.

Money Advice Direct always advise those looking to take out an IVA you may be restricted from opening bank accounts with main stream current accounts. It is therefore advisable to open a new bank account prior to starting an IVA.

If you would like to know if you will need to change bank accounts in an IVA complete the following form or telephone freephone 0800 074 6918.

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IVA's

The IVA Guide
Money Advice Direct has put together an IVA Guide based on the enquiries and questions that we receive at our helpline offices.

In the guide we cover such subjects as IVA Approval, early settlment of your IVA, missed IVA payments, IVA failure, additional debt claims and much more.
[click here for IVA Guide]

What is an IVA?
The IVA is an extremely powerful tool enabling you to clear your debt and return to a clean financial bill of health. Visit Money Advice Direct's Guide to Individual Voluntary Arrangements (IVAs).
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Will I need to change bank accounts in an IVA?

In an IVA you will need a 'Basic Bank Account'

You will NOT need to change bank account in an IVA if:-

IVA and Basic Bank Accounts

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