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The Government is launching a consultation into the difficulties faced by bankrupts when opening a bank account during or following bankruptcy.

The consultation will look at how many people have been affected by this so the Government can decide whether to take any formal intervention to improve access to bank accounts for bankrupts.

Bankruptcy can offer a fresh start to people who had unmanageable debts. However, their financial rehabilitation is often hampered by having no access to a bank account - ordinary tasks like paying bills become much more difficult without one.

There's no legal reason for a bank to turn down a bankrupt when they apply for an account and individual banks obey their own code of conduct on the matter - it's up to them whether they provide an account.

During bankruptcy, a trustee can recover money taken from a bank account by the bank. That's why most banks will not even offer a basic account to undischarged bankrupts.

The Business Minister Edward Davey said: "Access to a bank account is an essential stepping stone to help people manage their finances and to get them back on track after facing up to their financial difficulties. Without access to a bank account, even the simplest financial transaction is beyond reach for an undischarged bankrupt. What I want to see are financially capable consumers who are able to effectively manage their money, and make the fresh start they need.

"If evidence suggests that there are some people that are struggling to get a bank account, I want to see what can be done to help improve their circumstances."

Following the consultation, the Government could take any of the following steps to improve access to bank accounts for bankrupts.

  • Promote the providers who do provide bank accounts for bankrupts.
  • Ask banks to sign up to a voluntary code of practice to allow undischarged bankrupts to open an account.
  • Provide guidance to trustees on the right circumstances in which to pursue a bank for money and encourage them to do it rarely - which would reassure banks.

If these sorts of measures didn't work, the Government could introduce legislative change removing liability from banks, which would encourage them to let bankrupts open an account.

The consultation will end in February next year, when we may see some of these changes put into place.

If you are looking for a bankruptcy bank account, whether you are a discharged or undischarged bankrupt, you can apply for the thinkmoney Current Account - our alternative to a bankruptcy bank account if you are over 18 years of age and a UK resident. 

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