What Banks Accept IVA Customers? Updated List
Table of Contents
- IVA quick recap Jump
- Do you have to get a new bank account with an IVA? Jump
- Why do I need a new bank account with an IVA? Jump
- Another reason to switch banks Jump
- Could your IP get your bank account unfrozen? Jump
- Getting a new bank account before an IVA Jump
- What is a basic bank account? Jump
- Can I access my bank money after the IVA is approved? Jump
- What bank can I open with an IVA? Jump
- Can you have a savings account with an IVA? Jump
- What banks accept IVA customers? Jump
- Does your IP check your bank account? Jump
- Need more debt support? Jump
Do you want to know the banks that accept IVA customers?
IVAs and bank accounts can be difficult to get your head around, especially why you may be recommended a new bank account before the IVA has even started.
In just a couple of minutes of reading my post, you will better understand the situation and I’ll even list some of the banks that accept IVA customers.
IVA quick recap
An IVA is a formal debt solution whereby the debtor makes a single monthly payment, which gets proportionally split between all creditors included in the IVA (not secured debt creditors).
This continues for five years, at which point, the debtor must release equity from their home and pay a lump sum to end the IVA. Or they must continue making payments for another year. Whenever the IVA ends, any remaining unpaid debt is written off, giving the debtor a clean slate.
IVAs can only be set up by an accredited Insolvency Practitioner, and they may work within debt management companies offering IAV services. You have to pay for these services, usually thousands of pounds over the course of the IVA. But the fees are taken from the monthly payment; they’re not an extra expense.
Do you have to pay?
There are ways to have debt written off in the UK.
If you genuinely can’t afford your debt repayments then looking into whether you could have your payments lowered or written off might be just what you need.
Do you have to get a new bank account with an IVA?
Your Insolvency Practitioner could recommend that you close your existing accounts and open a new one before your IVA is approved.
There is a good reason why this would be in your best interest…
Why do I need a new bank account with an IVA?
You will be recommended to close existing accounts and open a new bank account prior to your IVA being approved.
This is usually the case if you owe money to the bank you currently hold an account with, including but not limited to the following debts:
- Unauthorised overdraft debt
- Unauthorised overdraft fees
- Fees relating to missed direct debit payments
- Credit arrears with the same bank, such as an unsecured loan or credit card debt
If you owe money to a bank that also holds your money and receives your income, it’s illegally allowed to take money from your bank accounts to clear debts. But in doing so, it could cause you to struggle to repay debts elsewhere or manage essential living costs.
In a nutshell, it gives the bank an edge to get its money back before any of your other creditors. This goes against the ethos of using an IVA where all creditors are treated equally and gets money proportional to the debt you owe them.
By changing banks to “neutral territory” you can help your cause to get an IVA approved as no creditor has an unfair advantage over your money before the IVA voting rounds.
If you don’t change banks in preparation for the IVA, your bank might vote against the IVA because it can recover money from you much easier than other creditors, which could result in the IVA proposal failing.
The practice of taking money from your current account to pay other debts you have with the same bank might seem unfair. But this process, which is called “setting off” is entirely legal as per the Financial Conduct Authority’s rules.
And if the IVA is rejected anyway, changing banks still stops your current bank from setting off to collect the debt.
Can you lower your repayments?
Some solutions lower your monthly payments while others write off a portion of your debt.
To find out whether they could work in your situation, hit the button below.
Another reason to switch banks
Another reason to change to a neutral bank where you have no debt is to avoid your account being frozen or closed by your current bank.
This could happen before your IVA gets approved if the bank decides it’s the only solution, and it could even happen after an IVA is approved if you do stay with the same bank.
Here s a typical story:
Having your account frozen after an IVA is approved can be very troublesome. You will need a bank account to make payments into your IVA on time. And it can be time-consuming to open a new bank, especially with an existing IVA.
Could your IP get your bank account unfrozen?
It’s certainly possible to get an IP to convince a bank to unfreeze or re-open a closed account.
But the process for this can take days, if not many weeks, which is time you probably don’t have if you need to keep up with IVA payments.
Missing IVA payments can have serious consequences. IVAs are legally-binding agreements that must be kept to. If you don’t keep to the payments, creditors can take legal action and even make you bankrupt in some instances.
So it could just be better to get a new bank account quickly and avoid this potential situation.
Getting a new bank account before an IVA
There is one issue when you want to open a new bank account. The bank will complete a credit check even when you’re just opening a current account – not just when you’re applying for credit.
It’s better to do this before the IVA has started because the IVA won’t yet be recorded on your credit file yet. However, people considering an IVA usually have multiple arrears due to missed repayments, which will already have been recorded on your credit file.
These records on your file might mean you’re rejected for the account you prefer. But there is always the option of a basic bank account.
What is a basic bank account?
A basic bank account is a type of bank account aimed at people who don’t qualify for a regular current account because of their poor credit rating. Although a credit check may still be completed, the results of the check don’t typically affect the application outcome.
These accounts do most of what other current accounts do, but they don’t have an overdraft facility to prevent more debts from materialising.
To get a basic bank account you must be at least 16 years old (sometimes at least 18 years old) and able to prove identification and proof of address.
There are very few occasions when a bank can reject you for a basic bank account, such as if you have been convicted of fraud or if you’re an undischarged bankrupt.
Some banks have renamed their basic account to make them more attractive.
Can I access my bank money after the IVA is approved?
You will have access to your bank account money once the IVA has been approved, provided that your current bank account hasn’t been frozen.
You will need the money in your account to manage essential living expenses and the IVA repayments each month.
However, if you had any savings, this money may need to be paid to creditors as a lump sum as part of the IVA proposal. Thus, the money you have will be enough to cover the essentials and repayments, as per your specific spending restrictions set down by the IP.
As mentioned above, you can avoid potential issues with your bank account after the IVA has been approved by moving to a bank where you don’t owe them any money beforehand.
What bank can I open with an IVA?
There are no legal requirements for you to have a certain type of bank account with an IVA. But some bank accounts may not be available to you due to your credit score and credit history.
You might get approved for a standard bank account, but your most likely option is going to be a basic bank account aimed at people with poor credit.
Can you have a savings account with an IVA?
The only thing stopping you from opening a saving account with an IVA is the bank’s credit check. But many people have managed to open some type of savings account while using an IVA, and they use this account to help them budget for IVA repayments.
What banks accept IVA customers?
I can’t say for certain which banks accept IVA customers seeking a regular current account. Each bank and building society applies its own lending criteria in regard to credit scores and IVAs.
But all banks offering a basic bank account will accept IVA customers as long as they haven’t been convicted of fraud.
Some of your many options include:
- Ulster Bank (Northern Ireland)
- Royal Bank of Scotland
- Co-operative Bank
- Lloyds Banki
- Bank of Scotland
Does your IP check your bank account?
Your IVA provider won’t actively check your bank account. But there are ways for them to find out if you’ve been concealing income which should have been disclosed so you make larger IVA payments.
“It will only get worse” 😩
It’s cliché to say, but with debt it’s true; the longer you leave it, the worse the problem gets.
There are straightforward and effective ways to deal with debt, but you have to know your options.
Need more debt support?
For further help with debt solutions and choosing the right one, it’s best to speak with a debt charity that can provide free advice based on your exact situation. For general information and support, my How to Beat Debt guide is worth reading!