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Bank accounts after bankruptcy

If you’re about to go bankrupt, the bank account you’re currently using could be closed. 

Most people these days need a bank account to receive wages and to pay priority payments such as household bills. So if you're declaring yourself bankrupt you’ll need to think about an alternative account. It’s a good idea to plan this in advance of going bankrupt so your income and household bills aren’t affected. 

Will my bank account be closed when I go bankrupt?

If you’re banking with any of the high street banks, there's a risk your bank account could be closed.

First, the official receiver will contact your bank straight after you go bankrupt and the account will be frozen while your finances are investigated.

The bank may then close the account. This depends on the type of account you’re using and whether you have other debts with the bank. Any money left in your account if it’s closed will usually be given to the official receiver.

If you use a joint bank account, it’ll still be frozen. The bank may:

  • close it and refund half of any money in the account to the other person named on the account, or
  • remove your name from the account and allow the other person to keep using it as a sole account

Are there any high street banks I can use while I’m bankrupt?

For the last few years it has been difficult to get a high street bank account if you’re bankrupt. However, a change in the law in December 2015 means that most high street banks should offer basic bank accounts which are suitable for bankrupts from 1 January 2016.

Until further details of these accounts are published, we recommend the following if you’re looking for a new account to use after bankruptcy: 

• Don’t apply to a bank for a new basic account if you already have other debts with them

• Ask the bank for a basic bank account, not a current account

• Tell the new bank that you’re opening a basic account because you have financial difficulties and you’re looking for an alternative to the account you’re using at the moment

• Make sure you ask when you open the account if the terms and conditions would allow you to continue using it after bankruptcy

Should I open a new bank account before or after I go bankrupt?

If you open a new basic account before you go bankrupt, you can move all your income and your priority payments to the new account. This reduces the risk of missing any bill payments. The new account will still be frozen for a short time after your bankruptcy.

If you wait until after your bankruptcy the new account won’t be frozen and you can use it as soon as the bank opens it. But you’ll need to move your income and bill payments over to the new account, and you may miss some payments to household bills if you don’t do this straight away.

When can I get an ordinary current account again?

Most banks won’t allow undischarged bankrupts to have an account. This means once you’ve been discharged from your bankruptcy you should be able to open an account with any bank or building society. You’ll normally be discharged 12 months from the date of your bankruptcy order.

After you’re discharged, you may still find it difficult to open some types of bank account. For example, it’ll be very unlikely that you’ll get an account with an overdraft facility. This is because banks will credit check you and because of your recent bankruptcy, they’ll be unwilling to give you an account where you can go into debt.

Alternatives to high street bank accounts while bankrupt

There are two alternatives to high street bank accounts which you could consider. However these may not have all the facilities of a basic bank account, or they may charge a monthly fee:

Post Office card account

If your income only comes from benefits or a state pension you could open a Post Office card account to use while you’re bankrupt. This is free and you can get your income paid onto the card.

You can withdraw money using the card but you can’t use it as a debit card and you can’t pay bills by Direct Debit or standing order. This means you’ll lose the Direct Debit savings offered by many utility companies, so although there’s no fee involved in having an account, it could still end up costing you more.

Pre-paid card accounts

Pre-paid card accounts are almost always available to undischarged bankrupts, but they can be very expensive. Most have a monthly fee or around £15-20 and you may be charged even more for adding money to the card or withdrawing money from cash machines. You ‘top up’ the card by adding money to it and you can use it like a debit card to spend money.

Most pre-paid cards allow you pay wages (and sometimes benefits) straight onto the card. Some cards also allow you to set up Direct Debit payments for your regular bills.

Helping you become debt free...

“I wish to thank your staff for all the great help they gave me when I was in so much debt.
They were a pillar of support to me.” (Leslie, Essex)

Foundation for Credit Counselling Wade House, Merrion Centre, Leeds, LS2 8NG trading as StepChange Debt Charity and StepChange Debt Charity Scotland. A registered charity no.1016630 and SC046263. It is a limited company registered in England and Wales (company no:2757055). Authorised and regulated by the Financial Conduct Authority.

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© StepChange Debt Charity 2016