Bankruptcy Tips Blog

How will bankruptcy affect my bank account?

Bankruptcy officially begins once a Bankruptcy Order is made. At that stage, your assets become the responsibility of the Official Receiver. When the Order is made, the Insolvency Service says you must stop using your cheque books and bank cards and hand them over to the Official Receiver, unless you only use that account for day-to-day living expenses.

Your main bank account may be frozen, in which case you’d need an alternative account for your income as well as your standing orders and Direct Debits, otherwise you could struggle. You might qualify for a bank account designed for bankrupts from an alternative provider, depending on your residential status and age.

Don’t try to open another bank account before the Bankruptcy Order is made, because it could be frozen along with the others. It’s a temporary inconvenience, but you should be able to apply for another bank account once your bankruptcy is in progress.

Bankruptcy has a massive impact on your credit rating, which could make getting a bank account difficult (because most banks will carry out a credit check when you apply). You could apply for a basic bank account, because those accounts don’t tend to come with such a strict credit check.

Any money you have in your account when it’s frozen is considered an ‘asset’ that could be paid to your lenders. However, the Official Receiver may ask the bank to release some of this money to you if you need it for essential living expenses, etc.

If your bank was overdrawn when it was frozen, the balance is another debt that’s added to your bankruptcy debts.

If you have a joint bank account with a partner, your partner’s credit rating could be affected by your bankruptcy. Your joint account would be frozen when the Bankruptcy Order is made. The bank could even ask your partner to pay any money that you collectively owe.

If you do have a joint bank account and you know you’re going bankrupt in the future, you might like to know that it’s still possible to open a joint bank account following the Bankruptcy Order and even during the process of bankruptcy – i.e. when you’re undischarged.

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