Bank Accounts and Bankruptcy

A bankruptcy order means that the bankrupt must stop using their cheque books, bank cards, store cards and debit cards immediately surrendering them to the Official Receiver who has been appointed.

Bank Accounts are normally frozen by the bank when they learn about the bankruptcy order.

Some banks allow bankrupts to continue using existing accounts. However they will freeze the account when they become aware of a bankruptcy order.

Therefore, arrangements need to be made with your existing bank to receive money and pay direct debits etc., Opening a new bank account just before the bankruptcy order is not advised as this account will also be frozen.

Bank Accounts in Credit at Bankruptcy

Money in an account at the date of the bankruptcy order is classed as an asset. The Official Receiver may allow the use of some of this money for essential living expenses, like food and bills.

Where a bank account is in joint names; the Official Receiver decides how much of the money to release to each of the account holders.

Bank Accounts Overdrawn at Bankruptcy

Any overdraft or outstanding balance on credit cards, store cards etc., is considered a debt in the bankruptcy. Therefore; payments must not be paid directly to these people, unless it is a secured debt. This is because the bankrupt would be giving preferential treatment over other creditors. The Official Receiver decides which debts are paid and in which proportions.

For bank account is in joint names, all parties are jointly responsible for the whole debt. This is the same for any joint credit agreement. Therefore the bank can ask the joint account holder facing bankruptcy to pay all the money owed.

Bank Accounts After Bankruptcy

A non discharged bankrupt can apply to open a new Bank/ Building society account, but they must inform the bank they are a serving bankrupt. New Bank accounts are likely to be a basic account without credit facilities. Banks are required by.

Money and Bankruptcy

Serving Bankrupts do not need to inform the Official Receiver or Trustee about any new account opened after the date of the bankruptcy order unless, asked. Nor are Bankrupts obliged to advise the Official Receiver or Trustee about money in any new account not amounting to more than needed for reasonable living expenses.

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