v Basic Bank Accounts with an IVA

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.

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

  1. Banks may cancel SOs/DDs if you don’t have money in your account to pay them on more than one occasion.
  2. Correct at time of print but always check with the bank or building society.
  3. The account may be closed if a Direct Debit or standing order is refused three times.

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To speak with one of our IVA specialists please call 0800 088 7502 or, alternatively, complete this form and one of the team will call you back at your preferred time.

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