Applying for a bank account while in debt

Applying for a bank account while in debt can be difficult, as not all banks can accept individuals with outstanding debt. This article explains how someone in debt can apply for a bank account.

Where can I get a bank account, if I have debt problems?

Although it may be more difficult for you to get a bank account you should be able to get one if you shop around. It may be wise to get a basic bank account with a bank where you do not have any current debt. The banks do not often advertise basic bank accounts but they do provide them if you ask for one. With a basic bank account, you should be given a debit card but are likely not have an overdraft facility.

Can I apply for a new bank account?

If your bank account was closed due to you not paying your fees. It is up to the bank if they accept you or decline you due to your outstanding debt. If you want to bank at the same bank you owe money to this might be possible, as it is unlikely (although it cannot be guaranteed) that the bank will have a record of this information if it’s been a very long time. If the bank is still contacting you to recover the debt, then it is more unlikely for you to open a new account with them. It may be wise to apply to another bank which is in no way associated with the bank you have the debt with.

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Can I open an account if I have judgments against me?

It depends on the bank. Most do credit checks when opening new accounts and judgments will show on your credit file. It will then depend on their criteria for selection and the type of account you’re opening.

Will a bank take my PPI payments towards an unpaid loan?

Reclaimed PPI can be payable as a refund to the borrower or offset against the balance of an existing credit product. If this is not linked to your loan then the lender does not have the ‘Right To Offset’.

If the money is refunded to a bank account and you have a loan that is linked to this account then the right to offset does exist, which means the funds could be put towards any arrears on your loan.

Can a bank force us to sell our house?

Ultimately yes, the creditor can force a sale but they would need to take action through the court prior to possession. Before beginning this process the creditor will try to establish how much equity is in the property to determine whether they would receive the full £30,000 following the house sale once the mortgage was repaid. Making monthly repayments is often acceptable to creditors if they are contacted and an arrangement is agreed. This often means the creditor does not force sale as they are receiving repayments and are content with the security of knowing that if and when the house is sold in future they will receive the full amount owed to them.

For more information, please see our article on debt against a property.

What happens if I have debt with the same bank as my mortgage?

If you have debt with the same bank that you have your mortgage with, that bank cannot use your mortgage payments to pay off your debt. Both the debt and mortgage payments will remain separate

Why can’t I make payments to my bank account?

If you are sending payments to your bank and they are being returned to you, then you need to speak to your bank. They will tell you where to send the money and you can ask them for a standing order form. If you aren’t confident speaking on the phone you can write them a letter – after all, you have money to send it’s in their interest to speak to you.

I have a DRO, can I get a bank account?

There isn’t anything in the law to state that you cannot open a bank account once you are the subject of a Debt Relief Order (DRO). However, the decision to offer you an account is at the discretion of each individual bank and the reality is that you may find it more difficult.

Most banks offer some form of basic bank account which operate without access to credit facilities but allow for Standing Order Mandates and can be used to deposit and withdraw funds. Banks change policy over time and your best course of action may be to contact the banks that are most convenient for you to ask if they will allow you to open and maintain an account with them whilst you are subject to a DRO.

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Can a bankruptee in Scotland get a bank account?

If you are bankrupt under the Scottish Law (Sequestration). It’s unlikely you will get more than a very basic account while bankrupt. You may get a debit card account from certain banks and building societies.

You should not be seen to amass assets such as savings while bankrupt as your assets can potentially be seized by your Trustee (usually The Accountant in Bankruptcy). If you want to save up your money, your best bet would probably be a community credit union. These are like little building societies run in the community.

You may also want to read our article on filing complaints against a bank.

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