Bankruptcy & Bank Accounts

When a bankruptcy order is made, the bankrupt must stop using their cheque book and bank cards, and immediately surrender them to the Official Receiver. 

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

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

Some banks allow bankrupts to continue to use existing accounts. Even if the bank agrees to this, they will freeze the account when they become aware of the bankruptcy order.

Bank Accounts in Credit at Bankruptcy

Money in an account at the date of the bankruptcy order is an asset in the bankruptcy. The Official Receiver may allow the use of some of this money for essential living expenses.

In the case where the bank account is in joint names, the Official Receiver decides how much of the money to release to each of the joint account holders.

Bank Accounts Overdrawn at Bankruptcy

Any overdraft or outstanding balance on credit cards is a debt in the bankruptcy. Therefore, payments must not be paid directly to the bank, unless it is a secured debt. This is because the bankrupt would be giving the bank 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 During Bankruptcy

During the bankruptcy, the bank may permit usage of existing accounts after they have consulted the Official Receiver.

A guide to basic bank accounts from the Money Advice Service

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.

The FSA (financial services authority) maintain a useful fact sheet which describes the basic accounts offered by all the major banks and building societies. see Basic Bank account information.

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