Basic Bank Accounts with an IVA
There's a possibility that a person who's going to enter an Individual Voluntary Arrangement (IVA) will need to open a new 'basic' bank account.
Follow this link if you are not sure whether you will need to open a new bank account for your Individual Voluntary Arrangement (IVA) .
The thought of having to open a new basic bank account can be a daunting prospect for someone who is feeling financially vulnerable and changing to a basic bank account can create one of the biggest mental barriers when applying for an IVA.
After all, many people have been loyal to the same bank for many years and often know the staff in their local branch by name. So the thought of changing to a different bank can take some getting used to.
Reasons Behind The Change
But nevertheless, changing your bank account to a basic bank account is a necessity. Opening a new basic bank account clears the way for your IVA contributions to made and ensures there are no conflicts of interest between your banking provider and your IVA's creditors.
If you don't open a basic bank account your IVA payments could be disrupted.
Your existing bank may decide to terminate or freeze your existing account at any time should they be made aware of the IVA, even if you don't have an overdraft facility on the account.
The bank might decide to take such action in order to prevent potential future borrowings through the account whilst the IVA is in force.
Right of 'set-off'
A more obvious reason for needing to change banks would be where you have a loan to be included into an IVA with the same bank that provides your current account facilities.
Banks have terms and conditions which entitle them to withdraw funds from a customer's bank account in order to maintain scheduled repayments to credit facilities the customer has with them, even if there are insufficient funds in the account to keep the balance in credit.
This is known as their 'right of set-off' and allows them to off-set one account against another, which can cause issues if you intend to enter into an IVA.
This action by the bank could create an unauthorised overdraft, which in turn can attract large charges and fees to the account in question.
So it's, therefore, essential that all current account details are passed to the Insolvency Practitioner for inclusion into the IVA, with a new basic bank account being opened with a different bank as a replacement.
Remember too, the new basic bank account should be opened with a creditor you have no existing debts with, either directly or indirectly through company mergers or acquisitions.
Different Types Of Basic Bank Account
This table shows which banks and building societies offer basic bank accounts and what services you can expect to get. All these accounts accept Automated Credit Transfer (ACT) payments, offer cash withdrawals at the Post Office®, and a cash-machine card.
| Bank Name |
Account Name |
Free Account |
Direct Debit | Standing Orders | Debit Card | Online Access | Mobile Access | Telephone Access | Branch Access |
|---|---|---|---|---|---|---|---|---|---|
| Bank of Scotland | Basic Bank Account | ||||||||
| Bank of Ireland | Basic Cash Account | ||||||||
| Barclays Bank | Basic Current Account | ||||||||
| Clydesdale Bank | Readycash | ||||||||
| First Trust Bank (NI) | Basic Bank Account | ||||||||
| Halifax | Basic Account | ||||||||
| HSBC | Basic Bank Account | ||||||||
| Lloyds Bank | Basic Account | ||||||||
| Nationwide | FlexBasic | ||||||||
| Natwest | Foundation Account | ||||||||
| Post Office | Control Account | ||||||||
| Royal Bank of Scotland | Basic Account | ||||||||
| Santander | Basic Current Account | ||||||||
| The Co-operative Bank | Cashminder | ||||||||
| TSB | Cash Account | ||||||||
| Ulster Bank | Foundation Account | ||||||||
| Yorkshire Bank | Readycash | ||||||||
| Danske Bank (NI) | Danske Standard | ||||||||
| Virgin Money | Essential Current Account | ||||||||
Explanatory notes
- Banks may cancel SOs/DDs if you don’t have money in your account to pay them on more than one occasion.
- Correct at time of print but always check with the bank or building society.
- The account may be closed if a Direct Debit or standing order is refused three times.
Professional IVA Advice
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