A question about : Bank Accounts & Bankruptcy
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For full info on basic bank accounts and how they relate to bankruptcy, see the main website's basic bank account guide.
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Some of this text was originally posted on the DebtQuestions forum by Tim/TalbotWoods. Many thanks for the time and effort to put it all together.
VERY VERY Important:
Please be aware that any bank account NOT listed in the section Who can a bankrupt open an account with? section below will MOST LIKELY be closed/frozen by your bank once they hear about your bankruptcy.
We KEEP seeing local branch staff of the other banks promise that an account will be OK after bankruptcy, only to see the head office/senior management overrule them later on and close the account without warning.
IT IS STRONGLY ADVISED TO OPEN YOUR NEW BANK ACCOUNT FOR USE AFTER BANKRUPTCY AFTER YOUR BANKRUPTCY HEARING AT COURT, IF AT ALL PRACTICAL.
WHILE IT IS POSSIBLE TO CONTINUE USING AN ACCOUNT OPENED PRIOR TO BANKRUPTCY IF BOTH THE BANK AND OFFICIAL RECEIVER COOPERATE, IT IS STILL POSSIBLE THAT THE ACCOUNT MAY BE FROZEN FOR A SHORT WHILE. IN ADDITION, THE LETTER OF THE LAW STATES THAT YOU SHOULD NOT CONTINUE TO USE ANY PRE-BANKRUPTCY ACCOUNT UNTIL YOU HAVE PERMISSION FROM THE OFFICIAL RECEIVER.
Remember to remove ALL cash from your accounts BEFORE being declared bankrupt, as after the Bankruptcy hearing, the money will technically belong to the Official Receiver, and he may refuse you access to it!
IF THE ACCOUNT IS A JOINT ACCOUNT AND ONE ACCOUNT HOLDER IS DECLARED BANKRUPT THE BANKS WILL TREAT THE ACCOUNT AS IF BOTH HAVE BEEN DECLARED BANKRUPT AND THIS WILL REFLECT ON YOUR CREDIT REFERENCE FILES
Additionally, if there is a debt on a joint account, the person going bankrupt will not be held liable for the debt, but the other account holder(s) will.
WHERE AT ALL POSSIBLE CLOSE ANY JOINT ACCOUNT BEFORE GOING BANKRUPT, ESPECIALLY WHERE ONLY ONE PERSON IS GOING BANKRUPT.
ONE FINAL POINT, ALL BANKS ACCOUNTS MUST BE DECLARED ON YOUR STATEMENT OF AFFAIRS, EVEN IF THEY ARE IN CREDIT - THERE ARE NO EXCEPTIONS TO THIS, AND THIS APPLIES TO ANY OLD DORMANT ACCOUNT - THE ONLY WAY THAT YOU DO NOT HAVE TO LIST THEM IS, IF THEY HAVE BEEN FORMALLY CLOSED FOR MORE THAN TWO YEARS.
Bankruptcy and Bank Accounts.
Once you are declared bankrupt.
Once you have been declared bankrupt, ALL accounts belong to the OR, so if you draw money out then you are committing an offence under the IA86.
The OR will inform the bank (or building society) if he has any interest in the account; until he has informed them the accounts belong to the OR not you:
If the OR has an interest in an account.
If he has and you attempt to use the account you will be committing a criminal offence.
It is highly possible that the account will show on line as being fully operational, and it may be that it is, but if you use it then you are in deep trouble.
The majority of the time the account will be 'frozen'; that is you can pay money in but can't take any money out.
If this has happened and you have had benefits paid in then you must obtain written authority from the OR to 'ask' for this money back from the bank, some will, some will fight you like hell.
The majority of accounts the OR has an interest in are those in debt and those with money in.
If the OR hasn't any interest in your account.
If the OR notifies the bank or Building society that he has no interest in the account, then the account is released back to the bank, NOT YOU.
Whether you are allowed to keep the account will depend on the terms and conditions, and only the bank will be able to tell you that.
Many banks and building societies stipulate in their T&C's that they will not provide banking facilities, unfortunately most banks are slow to carry out these processes, so it is again possible that the account shows as being fully operational, which very often means the account will show as being fully active, when in reality it is not!
After you have been discharged.
This is when the majority of us will see changes, these account suddenly vanish from you account details, as they are no longer classed as being in debt and the bank no longer holds them open for inspection by the OR
Who can a bankrupt open an account with?
The following are listed with the FSA as allowing un-discharged bankrupts to have accounts (or rather to open accounts):
The Co-operative Bank | Cashminder
Barclays Bank | Cash Card Account
You can apply to open any of the above accounts immediately after you have been declared bankrupt, there is no need to wait for permission from the Official Receiver.
All other basic accounts stipulate that you must be discharged from bankruptcy, and then they will look at you on a case by case basis!!
To see the full list of basic accounts, please clink on the link below:
Link: Basic Bank Account Factsheet.
Benefit Payments into bank accounts.
If you receive benefit payments into your bank account, then is it possible that once you are bankrupt the bank will not allow you access to the payments until they have had written confirmation from the OR that the account is of no interest to the OR, and this can take a couple of weeks.
About a month before going bankrupt, you can either open post office card benefit account or arrange for the payments to be made by giro for a few weeks (DWP will do this and you can tell them why)
You need to do this about a month before your bankruptcy date if you can
Payments out of your account (Direct Debits, Standing Orders, etc).
Make sure you cancel these with your bank before going bankrupt, and it is better if you cancel them in writing (rather than by phone or over the internet), as there have been a few cases where the bankrupt has been held liable for payment taken from an account after the bankruptcy date.
You need to aim to do this 10 - 14 days before your bankruptcy date to allow time for the bank to get their act together and stop them
Best answers:
- Debt Relief orders and Bank accounts.
To be added.... - The posts that were previously here have been moved into their own discussion thread for this sticky.
If you have news and/or suggestions about " Bank accounts for bankrupts", then please post on that thread.
Link: Bank accounts for Bankrupts - Discussion Thread
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