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Bankrupt bank account changes proposed 23 July 2013

A proposal to change insolvency law allowing bankrupts to open bank accounts in England and Wales has been put before Parliament.

The amendment will reduce financial risk for banks that offer accounts to undischarged bankrupts as part of the draft Deregulation Bill, brought by The Insolvency Service.

The changes were introduced following concern from consumer representatives that bankruptcy was stopping people from getting bank accounts – essential for basic tasks such as receiving wages, paying bills or shopping online.

Business minister Jo Swinson said: “We are now closer to removing barriers that have prevented banks from providing bank accounts for bankrupt people in the past.

“A bank account is not a luxury in this day and age, but a necessity. Most everyday transactions take place online including shopping, paying for utilities and receiving salaries.

“Last year, over 30,000 people were declared bankrupt and a similar number took up Debt Relief Orders (DROs), and it is only right that they get a chance to have bank accounts.”

In England and Wales only one high street bank offers a basic bank account to applicants who are undischarged bankrupts.

At present there is no law specifically preventing a bankrupt from holding a bank account, however a trustee in bankruptcy can in limited circumstances consider pursuing the bank for loss of money paid out from the bankrupt’s account.

Gillian Guy, Citizen’s Advice chief executive, said: “This change in insolvency law is a fundamental step towards making sure everyone has access to a bank account – an essential part of day-to-day life.

“I encourage banks to wholeheartedly embrace this change and to start making preparations now to offer accounts to undischarged bankrupts.”

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