Government looks into bank accounts for bankrupts

Government looks into bank accounts for bankrupts

Although people who have been made bankrupt are legally allowed to hold a bank account, in practice most banks refuse to allow an undischarged bankrupt to open one.

This reluctance is because of the risk that a trustee could pursue the bank for loss of money following a bankruptcy.

However, the lack of a back account can make life very difficult when it comes to paying bills, receiving wages and managing finances generally, while being forced to use cash can result in additional expenses being incurred.

In July last year Citizens Advice published a report suggesting that the current situation was causing undischarged bankrupts undue hardship.

The Insolvency Service has therefore launched a 12-week consultation into improving financial access for undischarged bankrupts.

It is considering a number of options, including establishing a voluntary code for banks to agree to give bankrupts access to basic bank accounts, and developing guidelines for trustees in bankruptcy.

If non-statutory measures prove ineffective the Government may legislate on the issue.

There are currently just two high street banks which allow undischarged
bankrupts to open basic accounts.

Business Minister Edward Davey said: “Access to a bank account is an essential stepping stone to help people manage their finances and to get them back on track after facing up to their financial difficulties.

“Without access to a bank account, even the simplest financial transaction is beyond reach for an undischarged bankrupt.

“What I want to see are financially capable consumers who are able to effectively manage their money, and make the fresh start they need.”

The latest figures from the Government’s Insolvency Service show that the number of people declaring themselves bankrupt has fallen 31 per cent year on year.

One of the factors in this fall is believed to be the high cost of declaring bankruptcy.

It costs £700 for an individual to declare themselves bankrupt and this has to be paid to the court immediately, although the cost can be reduced to £525 for people on low incomes.

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