Bank Account Access While Bankrupt Threatened

Updated: 21st September 2016

Bankruptcy has always had a number of myths attached to it. For example, people fear that there will be a notice in their local paper, that they’ll automatically lose their home, or that a van will arrive to collect their household possessions. Another such myth is that it’s impossible to get a bank account while you’re bankrupt.

In recent years, the UK banking industry hasn’t really wanted to offer bank accounts to bankrupts. They (via the BBA) said that “Banks who accept bankrupt customers open themselves to potential legal challenges from their customer’s creditors, who could have a legal claim to money passing through an account”.

Citizens Advice disputed that argument. They describe this risk as being “… largely theoretical rather than practical” and that they are “unconvinced” that this is the “… sole, or even primary, reason behind the banks’ reluctance to offer basic bank accounts to undischarged bankrupts”.

The implication was that offering basic bank accounts to undischarged bankrupts simply isn’t profitable enough to truly interest the banks. They stood accused of hiding behind a legal smokescreen to justify this potential financial exclusion for tens of thousands of people.

Two banks had risen above this issue. Barclays and the Co-op Bank offered basic bank accounts to undischarged bankrupts. However, in 2012 Co-op Bank announced that they no longer would.
The Co-op press release stated that it was unfair that they were providing so many accounts to undischarged bankrupts while almost all of the rest of the banking industry played no positive role (which rather confirms that these bank accounts aren’t financially lucrative for the banks that offer them).

This argument actually seemed to be entirely reasonable and fair. Operating in an ethical fashion should not mean that Co-op should be required to carry an unreasonable financial burden. Certain parts of the media were very critical of the Co-op announcement, with The Sun highlighting that Co-op will carry on offering bank accounts to prisoners but not law-abiding bankrupts. This seems especially unfair criticism of one of just two banks to have made a stand for financial inclusion.

The situation today is that there are two mainstream options for undischarged bankrupts in Scotland to retain banking services. The first remains with Barclays, using their Basic Current Account. The second is now provided by Virgin Money and their Essential Current Account.  

A very basic alternative to the above two accounts might be a Post Office Card Account.

There are also more functional alternatives which provide additional budgeting support. They can come with a hefty monthly fee however, which might not be the best use of your money while living on a pretty restricted budget during bankruptcy.

Becoming bankrupt does not mean that you cannot have a bank account. Your options will be restricted for a period of time, but perfectly useful banking options do exist. Further information on this subject can be read here.

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