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When you start the process of an IVA, you might need to think about changing your bank account. It is not always necessary but it might be in your favour to set up an IVA friendly bank account.
You’ll need somewhere to have your income paid, and you will also have to set up a standing order to make sure your IVA payments go in on time.
An IVA bank account cannot be with a bank that you owe money to. So if you have taken a loan out from Barclays, you’ll need to use a different banking company to keep your own money and pay out from.
It’s important to consider whether you have to do this before you enter into the agreement. Being prepared will help avoid any surprises or issues once the process begins. You don’t want to put added stress on yourself.
If you are entering into an Individual Voluntary Arrangement, you need to be careful with your banking and how you manage your money. Banks are allowed to set-off which means they can move money from one of your accounts to another if you default on your account.
This means if you begin an IVA and you still have an account with the same bank you owe money to; they can take funds and use them to pay back what is owed to them. They don’t need to ask your permission to do this either, so you should be aware of this and move to another provider beforehand.
If you’re looking for an alternative to conventional bank accounts, there are prepaid current accounts available which you can use instead. You can still use these for direct debits, a debit card, standing orders and paying money in.
The main difference is that these prepaid services are mostly managed online and you won’t need a credit check to be able to get one. Sometimes you will have to pay monthly fees, but this is not always the case, and you usually won’t be able to get an overdraft. This means you won’t have to inform your Insolvency Practitioner as an overdraft is a form of credit that you would have to get permission for.
This provides an option for people who don’t have the best credit history and can’t access a traditional banking method. It could also be used as an IVA friendly bank account.
When it comes to opening a bank account in IVA, there are many things to consider. If you owe money to your current bank as a result of an overdraft, loan or credit card, and these are included in your agreement, you need to change your account.
This protects you from the set-off rule so it needs to be a bank that is not grouped with the one you owe to. Your debt advisor should be able to discuss this with you and give you more information before you enter the agreement to ensure you fully understand.
If you’d like some more information about IVA friendly bank accounts, feel free to contact us and speak to one of our advisors to get some professional help. We have worked with many people in the UK to find debt solutions and improve their financial situation. Just speak to us and we’ll offer all the advice we can.