When you go bankrupt, your bank account will be frozen. During this time you might even have difficulty setting up a new account or managing your current one. This article explains everything you need to know about your bank account after going bankrupt.
You may also want to read our article on filing complaints against a bank.
What happens to my bank account after going Bankrupt?
The Official Receiver (OR) will freeze your bank accounts to allow them time to confirm that your income and expenditure is as listed on your bankruptcy forms. Then it will be released from their control. During this time, your bank may ask you to switch to a new basic account which would have no overdraft or credit facilities. They could even ask you to close your account and bank elsewhere. Some high street banks are more willing to give bank accounts to bankrupt people than others. Shop around locally and you will find a bank that will open a basic bank account for you.
Can I open a new bank account after going bankrupt?
You will not be alone in creating a new bank account. In fact, 150,000 people will become insolvent this year and almost all of them will need a new bank account. If you decide to open a bank account, this would depend on the bank rules and agreement, because some banks will allow a second chance to a person who went to bankrupt, while others won’t.
When you do create a new bank account, it is important that you always declare your bankruptcy when completing any forms. You must be absolutely truthful on your bankruptcy forms as you will swear to them and could be found guilty of perjury. Bankruptcy is a matter of public record, advertised in local newspapers and on the internet. Therefore it is almost certain that any bank you try to bank with in the future will find out about your situation.
What options do I have if I have been refused a bank account?
If you find that no bank is allowing you to open an account with them. There are a couple of other options you can consider if you have been refused a bank account:
Basic bank accounts
- You will have no credit facilities and you will not be able to use a cheque book. You may have access to telephone and internet banking.
- Receive wages, benefits, pensions and tax credit.
- Setting up direct debits and standing orders
Post Office card account
- Your credit record won’t be checked when you open this account.
- Receive benefit payments, state pension, and tax credit payments
- You can NOT receive housing benefit, payments from a workplace pension or your wages
Prepaid debit card
- This option is great for making payments to other people. However, you are limited to the amount that you put on the card.
- You can pay bills, transfer money and take money out of an ATM.
- Many prepaid cards charge a fee for different transactions.
What happens to joint bank accounts?
If you declare bankruptcy the Official Receiver (OR) will want to know about all the accounts and assets you have. Any money in a joint account will be considered to be available to pay off your creditors. In some circumstances, you can argue that a joint account means that you only have access to half the funds, but that is down to the OR that deals with your case. As a joint account holder, there will be some contact with the other account holder.
Need further information?
For more information on bank accounts after bankruptcy, please visit the Citizen’s Advice website.