Regarding car insurance -- yes, there are a few companies that mess around, but the majority don't. I went through my IVA (and beyond) with the same company and my premiums stayed much the same, as did the arrangement to pay in monthly instalments.
Here is an extract from the Immigration website regarding citizenship generally:
You must be of good character. Enquiries may be made to see if you are a security risk to the United Kingdom or if you have any criminal convictions. Checks are also usually made to see if you are financially solvent. This is not to see whether you can support yourself without public funds in the Untied Kingdom, but to establish whether or not you are bankrupt.
So it is unlikely to get citizenship if you are and undischarged bankrupt. You also need to put down any proceedings at court so if you have a CCJ or something you will not pass.
If the applicant is an undischarged bankrupt, or
does not provide the information requested, and
there do not appear to be any compelling reasons
for disregarding the bankruptcy, the application
should be refused.
4.4.1 Police enquiries, or other information, may suggest
that an applicant is heavily in debt. This, in
itself, should not be grounds for refusal if the
loan repayments have been made as agreed or if
acceptable efforts are being made to pay off
accumulated debts. But where an applicant
deliberately and recklessly builds up debts and
there is no evidence of a serious intention to pay
them off, the application should normally be
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