One of the biggest concerns people have before starting an IVA is what will happen to their bank account. It’s understandable. Your account is where your wages come in, bills go out, and everyday spending is managed, so the thought of losing access to it can feel worrying.
The good news is that having an IVA doesn’t mean you can’t have a bank account. In most cases, you’ll still be able to manage your day-to-day finances normally. However, there are some important things to be aware of, especially if you owe money to the same bank you currently use.
Understanding how bank accounts are treated during an IVA can help you avoid disruption and make the process feel much more manageable.
Will an IVA Affect a Bank Account?
An IVA itself doesn’t automatically freeze or close your bank account. However, some banks may review your account once they become aware you’ve entered into an IVA.
What happens next often depends on:
- Whether you owe that bank money
- The type of account you have
- The bank’s own internal policies
For many people, nothing changes at all. Others may be asked to switch accounts, particularly if they have debts linked to the same banking group.
Even if your current account is affected, you’ll still be able to open and use another account elsewhere. The key thing is making sure your income and essential bills continue running smoothly.
What Happens if You Owe Your Bank Money?
This is where people usually need to be most careful.
If you have debts with your bank, such as:
- An overdraft
- Credit cards
- Loans
The bank may decide to restrict or close your account after your IVA begins.
This happens because the bank is also one of your creditors. In some situations, they may use money paid into your account to reduce the debt owed to them. This is known as the “right of set-off”.
To avoid problems, many people choose to open a new bank account with a completely different banking group before the IVA starts.
This helps ensure:
- Your wages or benefits are protected
- Direct debits continue without interruption
- Everyday banking remains stable
Planning this early can prevent unnecessary stress later on.
Can I Open a Bank Account While in an IVA?
Yes, absolutely.
Even if your existing account is closed or restricted, you can still open another account during an IVA.
Many banks offer basic accounts specifically designed for people who:
- Have poor credit
- Are in an IVA
- Have experienced financial difficulties
Opening a new account before your IVA is approved is often the smoothest option, especially if you currently owe money to your bank.
When setting up a new account, it’s usually best to:
- Choose a bank you don’t owe money to
- Transfer wages and benefits across quickly
- Move essential direct debits over as soon as possible
This helps avoid missed payments or disruption during the transition.
What Types of Bank Accounts Are Allowed in an IVA?
Most people in an IVA use either a standard current account or a basic bank account.
Basic Bank Accounts
These are the most commonly recommended during an IVA.
They usually allow you to:
- Receive wages or benefits
- Set up direct debits
- Use online banking
- Make card payments
However, they don’t normally include:
- Overdrafts
- Cheque books
- Large borrowing facilities
For many people, this actually makes budgeting easier because there’s no access to additional credit.
Standard Current Accounts
Some people are able to keep their normal current account throughout the IVA, particularly if there are no debts connected to that bank.
Whether you can keep it depends on the bank’s policy and your financial situation.
What Accounts Should I Avoid?
There are certain types of accounts that may create problems during an IVA.
It’s usually best to avoid:
- Accounts linked to existing debts
- Accounts with overdraft facilities you rely on
- Premium packaged accounts with unnecessary fees
- Credit-based banking products
Overdrafts are particularly important to think about because they are usually included as part of the IVA debt. Once the arrangement begins, access to the overdraft is normally removed.
Trying to continue relying on overdraft borrowing during an IVA can make managing your budget much harder.
Can You Continue Using a Joint Bank Account During an IVA?
This depends on the bank and your individual circumstances.
A joint account can sometimes remain open if:
- The account is running properly
- There are no debts linked to it
- The bank is happy to continue offering the account
However, there are situations where the bank may decide to close or restrict a joint account if one account holder enters an IVA.
It’s also important to remember:
- A joint account holder can still be affected by joint debts
- Your IVA only covers your own debts, not someone else’s
If you share finances with a partner, it’s usually worth discussing the situation with your IVA provider beforehand so you understand what changes, if any, may be needed.
Will My Wages Still Be Paid Into My Account?
Yes. An IVA does not stop you from receiving wages, benefits, or other income.
Once your account is active and functioning normally, your income can continue being paid in as usual.
This is another reason why setting up a suitable account early can help make the process feel smoother and more stable.
Can I Get an Overdraft During an IVA?
In most cases, no.
An IVA is designed to help you deal with debt, so taking on additional borrowing during the arrangement is heavily restricted.
Most IVA terms state that:
- You cannot borrow above a certain amount without permission
- Existing overdrafts included in the IVA will usually be removed
This is intended to help prevent further debt building up while you’re repaying what you already owe.
Managing Your Money During an IVA
Adjusting to life without overdraft borrowing can take time, especially if you’ve relied on it for years.
Many people find it helpful to:
- Create a simple monthly budget
- Separate bills from spending money
- Build a small emergency buffer where possible
- Monitor spending more closely
At first, this can feel restrictive. Over time, many people say it actually gives them more control because they know exactly where their money is going.
What happens next?
If you’re thinking about an IVA and aren’t sure how it could affect your bank account, it helps to speak to someone who can talk through your situation properly.
At My Debt Plan, we help people understand what to expect before making any decisions, so there are no surprises along the way.
You can get debt help online or speak to our team for a confidential conversation. Call us on 0161 464 0870 and take the first step toward getting your finances back under control.
