Duncan Lewis


Asylum, Detention/ Fast Track

Managed Migration, Public Law

Bankrupts would be allowed to open basic bank accounts says business minister

Date: (10 December 2012)    |    

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Insolvency solicitors and insolvency trade bodies have welcomed the news that the laws in England and Wales on Insolvency was going to be changed so as to allow un-discharged bankrupts find easier access to high street bank accounts.

A study had revealed that 79% of the British population agreed that un-discharged bankrupts should have access to a basic bank account.

Business Minister Jo Swinson too agreed that legislative changes to the Insolvency Act 1986, which would restrict the circumstances in which a trustee in a bankruptcy can make a claim against a bank.
Currently there is no law specifically preventing a person who is bankrupt from holding a bank account. However, a trustee in a bankruptcy can, in limited circumstances, pursue the bank for loss of money paid out from the bankrupt’s account. For this reason, most banks do not offer even a basic account to un-discharged bankrupts.
Furthermore, making this change through law rather than by a voluntary code or guidance ensures that the insolvency practitioner’s statutory duties remain clear, and there will be no conflict with their duty to recover funds for creditors
Experts have said it was a positive move and is recognition that there was life after bankruptcy. Bank accounts were a necessity and not a luxury they said.

Bankruptcy offers a second chance for people who have got into unmanageable debt situations, but it can sometimes lead to difficulties in keeping or opening bank accounts. Without access to an account, people may struggle with basic tasks, such as receiving wages and paying bills, and they can incur additional expenses as a result.
Swinson said having access to a bank account would mean allowing vital transactions to be made quickly and safely, avoiding the risk of carrying around large sums of money. People take these everyday tasks for granted, but for bankrupts attempting to make a fresh start, they can be a whole lot more stressful.
Offering an account would remain a decision for the bank, but Swinson said that he was pleased with the positive response received by the sector already and that he was confident the change would offer a new life line to vulnerable people who have struggled to access basic financial services.
Citizens Advice chief executive Gillian Guy said that it was vital un-discharged bankrupts can get a bank account in order to get their finances back on track. Without one, it’s difficult for them to receive wages or pay bills by direct debit.
He added that the proposed change in the law was very welcome and would mean there was no reason for banks not to provide accounts to these customers. The change had to be brought in as a matter of urgency to help un-discharged bankrupts who were currently excluded from mainstream banking.