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IVA : Do I Need To Open A New Bank Account For My Individual Voluntary Arrangement ?
In most Individual Voluntary Arrangement cases it will be necessary to open a new bank account, and usually, the sooner the better.
This is because, in the majority of cases, people with debt problems have at least one debt with their current preferred bank.
This could be an overdraft, a credit card or perhaps a loan.
When things are going well and monthly repayments are being made on schedule, the bank are happy to allow you run your accounts as normal. They have the security of knowing that your income will be placed into the account each month, thus reducing their risk of you not paying them back.
However, when things start to become too difficult to manage, and it becomes impossible to maintain the repayments to all your creditors, the bank receiving the wage cheque each month have the advantage.
If you miss a payment to a credit card company or a loan account that belongs to a different bank than the bank your wages get paid into, there is little that they can do about it, other than charge you late payment fees.
However, if you miss a payment to a loan account held with your preferred bank, they can, and probably will, take the loan repayment automatically from your current account.
And this is where the problems start.
When considering an Individual Voluntary Arrangement as a method of becoming debt free, all your creditors must be treated equally. This means that no one creditor is allowed to have an advantage over the others.
To stop this becoming an issue with the Individual Voluntary Arrangement application, you will be advised to open a fresh bank account with a bank that you do not owe any money to.
The new account can be with any bank or building society, but the account must be a basic bank account. This means that you should not have any credit attached to the account at all. There should not be an overdraft facility, a credit card or cheque book provided with the new account.
It can, however, have a debit card facility, which will allow you access to your funds in the account electronically, so long as there are sufficient funds in the account at the time.
For further information on how to obtain a basic bank account call myIVA-Adviser.com on 0800 088 7503
