If you are currently Bankrupt or have already been discharged you may be thinking about making a claim for PPI. However it is important you understand what will happen to any compensation you are awarded.
Jump to article content:
- Claiming for PPI during Bankruptcy
- Making a claim after you are discharged
- Can you claim against a debt paid before you went bankrupt?
- What is the point in claiming for PPI after Bankruptcy?
The deadline for claiming for PPI was 29th August 2019. If you did not make your claims before that date you are no longer eligible. No new PPI claims can now be submitted.
Claiming for PPI during Bankruptcy
While you are Bankrupt any windfalls receive must be paid to the Official Receiver or your Trustee for the benefit of your creditors. PPI compensation falls into the category of a windfall.
As such if you are awarded compensation before you are discharged you cannot keep it. You are obliged to inform the OR or your Trustee in Bankruptcy of any money that you receive.
Not telling them about it could be viewed as non cooperation resulting in your bankruptcy being significantly extended and may even be a criminal offence.
If you claim for PPI during bankruptcy it is likely that the bank will pay it directly to the OR without consulting you.
Making a PPI claim after you are discharged from Bankruptcy
You are allowed to keep most windfall payments that you receive after you have been discharged from Bankruptcy. For example if you receive an inheritance payment which was not due to you while you were bankrupt or if you have a lottery win you will be able to keep this money in full.
However PPI compensation paid to you after you are discharged is treated differently. This money will still have to be handed back to the Official Receiver who was dealing with your case.
This is because if you were mis-sold before you went bankrupt then the opportunity to claim already existed during the procedure (whether you were aware of this or not). As such the compensation is considered an unrealised asset and it must still be paid to your old OR even though you are already discharged.
Any bank due to make a PPI payment to you is likely to check whether or not you are a discharged bankrupt. If you are they will normally automatically pay any compensation directly to the Official Receiver’s office.
Can you claim against a debt paid off before you went bankrupt?
You may have been mis-sold PPI on a debt which you fully repaid before your Bankruptcy. As such this debt was not included in the procedure. Despite this any compensation payment you receive against this debt is still payable to the OR.
This is because this payment is also an unrealised asset of your bankruptcy. The opportunity to claim existed while you were bankrupt even though the debt was not included.
In this situation the bank who is due to pay you compensation may not be aware that you were bankrupt in the past. As such it is possible that they will make the compensation payment directly to you. If this happens you must inform the OR that the payment has been received and hand it to them.
Is there any point in making a PPI claim after discharged from Bankruptcy?
After discharge from Bankruptcy there is absolutely no reason why you should not make a claim if you feel that you have been mis-sold PPI.
However you need to understand that you will not benefit from any compensation received. The people who benefit will be your unpaid creditors.
You may feel that you have an obligation to do anything you can that helps to return funds to your creditors and making a claim for PPI mis-selling could help towards this. However on the other hand you may not feel this way.
With this in mind you need to decide for yourself whether or not making a PPI claim is the right thing to do.
Arrange a call with a PPI Expert
Privacy Policy
Your information will be held in strictest confidence and used to contact you by our internal team only. We will never share your details with any third party without your permission.
I received letter of discharge from my bankruptcy in 2013. This year (2018) I made a PPI claim. I was offered 4 settlements total of 47.000 pounds. Insolvency service has intercepted all the money and said was an asset.
If we had even thought this was an asset we would have drawn it to pay out mortgage and saved our home from being taken from us. How can paying for PPI for protection be regarded as an asset…..it is not a form of savings etc.
How can your letter of discharge state” you are free from any obligations and restrictions” when it is not true.
Hi Stewart
As highlighted in the article above PPI compensation paid for any debts you had (or had paid off) at the time you went bankrupt are considered an asset of your bankruptcy estate. This is because the opportunity to claim and therefore get the compensation existed at the time you were bankrupt.
Given this there is pretty much zero point in making claims for PPI after you are discharged from bankruptcy unless the claims are against debts you took out AFTER you were discharged.
It is important to understand that most windfalls you get after the date of discharge would be yours to keep. For example a lottery win or inheritance from someone who passes away after the date of discharge. However PPI is different because the reason for the claims (i.e the mis selling itself) happened before you went bankrupt so the opportunity to claim and get compensation also existed at that time. Whether you knew about it or not is irrelevant.
If I am making a claim for PPI on loans or credit cards paid off before going bankrupt would I get the settlement?
Hi Michelle
Any PPI compensation paid to you whether for a loan paid off before bankruptcy or included is still treated as an unrealised asset. As such it would still go to the OR and there is really no point in making such claims.
Can I make a ppi claim (through a claims agancy) on debts taken out after I was discharged from bankruptcy- was discharged in 1993 and the debt was taken out in 1998, I don’t want the risk of winning a claim, not being paid but still owing the claims agancy.
Hi Steven
If you have not already submitted your claims then I am afraid the option is no longer available to you. The deadline for making PPI claims was Aug 29th 2019.
If you made claims before that date and given the debt you claimed against was taken out after your were discharged the compensation would not be part of your bankruptcy. This is because the opportunity to claim did not exist while you are bankrupt. As such you would get the money.