Bankruptcy and my bank accounts
If you live in the United Kingdom and are declared bankrupt, there are certain restrictions placed on your bank account. You will no longer be able to overdraft your account, and any money you have saved will be used to pay off your debts. You may also be required to close your account and open a new one with a bankruptcy restriction order. This order limits the amount of money you can withdraw each month and restricts you from opening new lines of credit. While these measures may seem inconvenient, they are designed to help you get back on track financially and prevent you from incurring additional debt. Once you have completed your bankruptcy process, you will be able to open a new bank account without these restrictions.
All current accounts will be frozen during bankruptcy.
Before your bankruptcy starts, you will have to make sure you’ve taken out and kept money aside for all essential expenditures.
No. Savings are considered as a surplus to your essential requirements. These are seized and used to pay back as much debt you owe as possible.
It means you cannot make any payments into the account i.e. deposit money or take payments out of the account i.e. make ATM withdrawals or pay direct debits.
This decision is entirely up to your bank.
The official receiver in charge of your bankruptcy will first review how much is in your bank account versus your necessary living expenses and will let you know how much you can withdraw.
You will have to give this back to your official receiver. In some cases, they may let you keep it.
Recent law changes have meant you might still be able to use a basic bank account, even if you’re going through bankruptcy. Basic bank accounts are designed for people with low income, poor credit rating and a history of debt.
Basic bank accounts allow you to carry out necessary functions such as receiving wages, cashing in cheques and making withdrawals to pay bills.
These will also be frozen and the official receiver will give the other account holder an amount that represents their stake in the bank account.
They will reimburse themselves on any debt you owe them before freezing the account.
You can, but this is at the bank’s discretion, as you may have to declare bankruptcy on your application. A better idea is to try and convince your existing bank to keep your account.
Nobody needs to know, however, if you accumulate enough money in the bank account that could be considered beyond essential and reasonable expenses, you have to let the official receiver (or whoever is dealing with your bankruptcy) know. It’s a crime to not let them know.
You can use a pre-paid debit card for simple things like paying bills, money transfers and cash withdrawals.
Like a regular debit card, you can only spend using it if there is cash on the card. The only difference is that it is not linked to a bank account, so you have to top it up at the Post Office or a pay-point machine.