Insolvency law in England and Wales is set to be changed - which will hopefully encourage more banks to offer accounts to undischarged bankrupts (according to a recent announcement from the Insolvency Service).
There is currently no law that forbids bankrupts from having an account. Despite this, however, more than 18% of bankrupts find they can't get an account during their bankruptcy. They have to either manage all of their finances with cash, or use somebody else's account.
So why is this? Well, under the current bankruptcy law, trustees can make a claim against a bank to help reclaim some of the money owed. In some circumstances, they can hold a bank responsible for any money paid out from the bankrupt's account, and pursue them for it. This has made banks very unwilling to offer even basic bank accounts to bankrupts.
This is all set to change, however, as the new law will ensure that banks are protected against claims from trustees. There is an exception, however - if a trustee sends a specific notice to a bank about an asset they are interested in that will benefit the estate, they may still be able to make a claim.
The Business Minister, Jo Swinson - who announced the change in the law - said: "Having access to a bank account means being able to make vital transactions quickly and safely, avoiding the risk of carrying around large sums of money. Most of us take these everyday tasks for granted, but for bankrupts attempting to make a fresh start, they can be a whole lot more stressful.
"Insolvency law can also cause difficulties for the banks, so that's why we're amending it to help them offer more accounts to bankrupts.
"Offering an account will remain a decision for the bank, but I am pleased with the positive response we've seen from the sector already and I'm confident the change will offer a new life line to vulnerable people who have struggled to access basic financial services."
An expert from thinkmoney added: "Only one high street bank currently offers an account for undischarged bankrupts at the moment - but hopefully this change in the law will encourage others to follow suit.
"It's not just high street banks that can offer these services, though. There are other specialised providers - such as thinkmoney - that offer personal accounts for everyone, including undischarged bankrupts.
"The thinkmoney Personal Account has no credit check - so undischarged bankrupts (and anyone else with a poor credit history) will be accepted as long as they are a UK resident over the age of 18. There is also a personalised budgeting service built into the account, which could help you get back on your feet financially after bankruptcy."