Bank accounts, phone contracts and insurance in an IVA

An IVA deals with the debts you owed when it started. It does not close your bank account, cut off your phone or cancel your insurance. What it does is change a few practical things: a bank that is also one of your creditors has rights over money in your account, and the IVA’s rule on borrowing reaches into some everyday contracts. This guide covers both, and what to check before and during the IVA.

The rules below are the standard terms for protocol IVAs agreed from 1 July 2025. Older IVAs and bespoke IVAs can differ, so check your own proposal.

Can you keep your bank account in an IVA?

Usually, yes, as long as you do not owe that bank anything.

If you owe money to your bank, or to a company connected to it, the bank can take money from your account to pay that debt. This is the right of set-off, sometimes called the right of offset. Citizens Advice suggests getting your income paid into an account at a different bank before your IVA starts, and says your insolvency practitioner should help you with this.

StepChange explains the limits on it: it applies where the current account and the debt are with the same lender and in the same name. Money can be moved from a joint account to a joint debt, but not from a joint account to a debt in one person’s name. The bank should warn you clearly in advance and take your circumstances into account.

If you have a joint overdraft or joint loan, remember the IVA only deals with your share of the liability. The standard terms say the rights of a creditor with a claim against someone else, such as your partner, are not affected. See will an IVA affect your partner?

What is a basic bank account, and can you get one?

A basic bank account does the everyday jobs of a current account without an overdraft. Under the Payment Accounts Regulations 2015, the banks designated by the Treasury must offer them, and:

• the account must let you pay in and take out cash, receive payments, pay by card, and set up Direct Debits and transfers
• the bank must not provide an overdraft on it
• the bank must not charge for those standard services in sterling, and there is no charge when a payment fails for lack of funds
• you are eligible if you are legally resident in the UK and do not already have a UK current account with those features, or cannot get the bank’s other accounts. People with no fixed address count as resident.

The grounds for refusing one are narrow, mainly where opening it would break the law on fraud, money laundering or immigration, or where someone has been abusive to staff. StepChange says banks cannot use the rating on your credit file as a reason to refuse you, although they will normally refuse an undischarged bankrupt or someone with a record of fraud on their credit file.

Once open, the regulations only let a designated bank close a basic account for specific reasons, such as illegal use, no transactions for more than 24 months, or the customer opening another account with the same features. An IVA is not one of them.

Unlike a debt relief order, where you must tell a bank about the DRO when opening an account, the standard IVA terms have no rule like this.

Which contracts does the £500 credit rule cover?

The standard terms say you must not obtain any credit greater than £500 without your supervisor’s prior written approval, “except for public utilities, insurance policies or other contractual payments as provided for in your income and expenditure”. Getting credit of more than £500 without consent is a breach of the IVA.

So the question for each contract is whether it is a bill for a service already in your budget, or borrowing.

This is a general guide. If you are unsure whether something counts as credit, ask your supervisor in writing before you sign. Our guides to borrowing during an IVA and credit checks go through the rest.

Can you get a phone contract during an IVA?

Yes, but the type of contract matters.

• SIM-only or pay as you go. These pay for the service, not a phone. They are the simplest option during an IVA, and many do not involve borrowing at all.
• A contract with a handset. Paying off an expensive phone over two or three years can mean borrowing well over £500 for the handset. Ask your supervisor before you sign, and expect the provider to run a credit check that will show your IVA.
• Your existing contract. If you are up to date and the provider is not one of your creditors, it normally carries on and the monthly cost is part of your budget. If you owe the provider arrears, those can usually be included in the IVA: see what debts can go into an IVA.

Your budget is drawn up using the Standard Financial Statement, which allows for reasonable phone and internet costs. A top-of-the-range contract may be questioned by creditors, because every pound it costs is a pound not going to them. See how much an IVA leaves you to live on.

What about energy, water and broadband?

These carry on as normal, and paying for them is part of your budget. Energy and water arrears you owed when the IVA started can usually be included in it. Bills for what you use after it starts are yours to pay as they fall due.

A supplier may run a credit check when you open a new account or move home. That is not an application for credit in the usual sense, and utility contracts are expressly outside the £500 rule.

Can you get car, home or other insurance in an IVA?

Yes. Nothing in the IVA stops you buying insurance, and insurance policies are outside the £500 rule. Car and home insurance you need are normal costs in an IVA budget.

Paying monthly

Paying for insurance in monthly instalments usually means borrowing: the FCA calls it premium finance, and describes its cost as a yearly rate on the money borrowed. The provider may run a credit check. If you can afford to pay annually, it usually costs less. If you cannot, the monthly option is still covered by the insurance exception as long as the cost is in your budget.

Life, health and payment protection cover

The IVA Protocol says that if you want to keep paying for your own life insurance, health insurance, or payment protection linked to secured borrowing, the proposal should explain why that cost is essential. Tell your insolvency practitioner about every policy you have, and why you need it.

Answering the insurer’s questions

If an insurer asks whether you have an IVA, a CCJ or any insolvency, answer truthfully. Under the Consumer Insurance (Disclosure and Representations) Act 2012 you must take reasonable care not to give the insurer wrong information. If you do, and the insurer would not have covered you or would have charged more, it can reduce or refuse a claim, and if the wrong answer was deliberate or reckless it can cancel the policy and refuse all claims.

What do people get wrong?

• “The IVA will close my bank account.” It will not, but a bank you owe money to can take money from your account. Move your income before the IVA starts.
• “Any phone contract needs permission.” A SIM-only plan in your budget does not. A handset deal worth more than £500 in credit does.
• “Paying insurance monthly is the same as paying annually.” Monthly usually means borrowing and costs more, although it is covered by the insurance exception if it is in your budget.
• “I can leave the IVA off my insurance application.” You must take reasonable care to answer accurately, or the policy may not pay out.

What to do next

1. List every bank account, card and contract you have, and note which providers you owe money to.
2. If your bank is a creditor, open a basic account with a different bank before the IVA starts, and move your income and bills across.
3. Before signing any new phone, finance or credit agreement, check whether it involves credit of more than £500, and if it does, get written approval from your supervisor first.
4. If you are unsure whether an IVA is the right route at all, compare it with other options in IVA or debt management plan?. Free, impartial debt advice is available from MoneyHelper, StepChange, Citizens Advice and National Debtline: see where to get free debt advice.

For more on day-to-day life in an IVA, see life in an IVA. If you use our checker, we may pass your details to a licensed insolvency practitioner or debt adviser.