You are allowed to have a bank account if you are bankrupt. However you will normally have to stop using the one you have now and open a new Basic Account
- Do you need to open a new Bank Account if going Bankrupt?
- Which bank should you choose?
- When do you start using your new Account?
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Do you need to open a new Bank Account if going Bankrupt?
If you plan to declare yourself bankrupt one of the first things that you are likely to need to do is open a new bank account. This is because once you are bankrupt the account you are using at the moment will be frozen.
You should open your new account a few weeks before you declare bankruptcy so that you have time to change the details with your employer and anyone else from whom you receive money. You will also need to change all of your direct debits to ensure that your rent, mortgage and utility bills are paid on time.
BMD Tip: You may think that you will not be allowed to have a bank account. This is not the case. You are certainly allowed to have a bank account but the choice of banks who will be prepared to give you an account is limited.
Which bank should you choose if you are going Bankrupt?
There are only a limited number of banks that will be prepared to keep your account open after you have gone bankrupt. These are currently Barclays and the Co-Op. You will therefore need to consider opening an account with one of these banks.
It is important that you ask for the bank’s simple account (commonly known as a card cash account) which offers no credit facilities. The name of the Barclays account is the “Cash Card” account and the name of the Co-Op account is the “Cash Minder” account.
BMD Tip: If you want open a Co-Op Cash Minder account it is important to open this and start using it before you go bankrupt. If you do this it will remain open after you are bankrupt. However you will not be allowed to open the account if you are already bankrupt.
The benefit of opening an account with either Barclays or Co-Op that it will be free. However if you do not want to open an account with either of these banks for any reason you do also have the option of opening a Management Bank Account. These type of accounts are generally available to anyone with a poor credit rating even if you are already bankrupt. However you have to pay a monthly fee to keep them open.
When do you start using your new Bank Account?
Once your new bank account is open you can start to use it straight away. You do not have to wait until after you are bankrupt. You should speak to your employer and give them your new bank account number so that your wages will start being paid into the new account. You should also change your bank details with any other people who pay money directly into your account such as child benefit, tax credits and any other benefit payments.
Of course you will also need to make sure that any direct debits you have set up for the living expenses payments that you must continue to pay are changed to your new account.
BMD Tip: If your employer is not be able to stop your next wage payment from being paid into your old account do not worry. Once the money is paid into your old account simply draw this out (in cash if necessary) and pay it into your new account. Do not be afraid of drawing out exactly the same amount as was paid in by your employer even if this means going into your overdraft facility.