Following a three-month public consultation conducted by the Insolvency Service early this year, insolvency law will be changed in England and Wales in a bid to encourage more banks to offer accounts to undischarged bankrupts.
The change in the law will restrict the circumstances in which a trustee in bankruptcy can make a claim against a bank, which might encourage banks to at least offer a basic account to these people.
At the moment, 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, thereby making it risky for banks to offer accounts.
Unfortunately, without access to a bank account, people may struggle with basic transactions such as receiving wages or paying bills, while the alternatives to carry out these tasks are often expensive.
Business Minister Jo Swinson, who announced the change in the law last week, said that the Government is changing it, as the current insolvency laws cause difficulties both for bankrupts and banks.
Ms Swinson stressed that offering an account to an undischarged bankrupt will remain the decision of the bank, but feels that the positive response the Government has received from the sector bodes well for the future, as several banks have indicated that they would be willing to change their policies if the law were to be amended.
The proposed change will mean that unless a bank has received a notice in a specific form from a bankruptcy trustee about an asset which will benefit the estate and which the trustee is interested in, they are protected against claims from that trustee.
Tim Close is an accountant specialising in business insolvency, debt recovery and business rescue.