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How bankruptcy affects me

Bankruptcy and my bank account

You should still be able to have a bank account after you go bankrupt and once you’ve been discharged from bankruptcy, but it will be a basic bank account.

During bankruptcy, your current bank is very unlikely to allow you to keep your account if you have an overdraft or other debts with them. If they do close the account, any money left in your account will usually be given to the official receiver (OR), although the OR may allow you access to some of the money if you need it to cover essential living costs.

The rules around debt relief orders (DRO) have changed. These changes could benefit those considering an insolvency solution like bankruptcy. Please take a look at the changes, as for some people a DRO will be a cheaper alternative to full bankruptcy.

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Will my bank account be closed when I go bankrupt?

Even if you have no debts with them, banks will usually freeze your account immediately after you go bankrupt. This usually lasts a few days while the official receiver dealing with your bankruptcy checks your transaction history.

After that, the bank may close your account altogether, which will mean you need to open a new account with a different bank. However, in some cases the bank may allow you to keep an account with them as long as it’s a basic account. 

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 open a new bank account in advance of going bankrupt so your income and household bills aren’t affected. 

Joint bank accounts and bankruptcy

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

  • remove your name from the account and allow the other person to keep using it as a sole account. In this case, half of any credit balance will be paid to the official receiver

Bank accounts for bankrupts

All high street banks now offer basic bank accounts which are suitable for bankrupts. 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 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 will 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. However, you’ll need to move your income and bill payments over to the new account, and there’s a risk 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 a current 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 from bankruptcy 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.

Bankruptcy will affect your credit rating and will make it difficult for you to get a loan or any other types of credit.

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 any benefit income paid onto the card, but you can’t use it to receive wages or other income.

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 which can be up to £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.

Free bankruptcy advice

If you’re considering bankruptcy, make sure you get free, impartial debt advice first. We'll then be able to recommend the best solution for your situation.