I can't have a bank account IVA Myth
Summary: I can't have a bank account - This article seeks to reassure those considering an IVA (Individual Voluntary Arrangement) that they can choose a perfectly acceptable bank account to have income paid into, and utilise normal banking facilities.
Many people in financial difficulty and looking at debt solutions owe their own bank. This is often in the form of an overdraft that we have found ourselves depending on. As well as overdrafts we may owe our own bank(s) through credit cards or bank loans. In an IVA all unsecured debt has to be included, and if our bank is one of our creditors, that debt must be included, and we will be required to stop using that account.
Opening a new account
In an IVA it is quite proper to have an ordinary bank account with a normal bank, as long as that bank is not involved in the IVA as a creditor. Furthermore it will not be appropriate to have a credit facility whilst in an IVA, so a credit card or overdraft should not be taken (the idea of the IVA is to break the need for credit). Visiting a branch or applying for an account by phone or online will be possible, and there is no particular need to state the reason for the change unless asked. The important thing is to ask for a basic account where a debit rather than a credit card is provided and normal banking facilities are available but without an overdraft.
Living in an overdraft is fairly depressing for a variety of reasons. One is that it makes budgeting difficult. The account has a negative balance anyway, so there is not the same incentive to live within one's means. A new account with no overdraft, a single affordable repayment on debts, leaves you with a balance that can spell out exactly how much money we have to manage on until next pay day. It really can be a fresh start.
Where a joint IVA is being proposed, then the above still applies. If however, the IVA proposal is a single one and that debtor has a joint overdraft, there are further implications. It is unlikely that the bank will remove one of the names on the account. Therefore in a single IVA that account has to go into the IVA and the debtor will have to stop using it. The other named person on the account will though still be liable for the overdraft and will need to sort out some repayment plan, and in all likelihood would need to stop using that account too.