When you enter sequestration you’re able to finally escape the debt spiral, but you must also adjust to a new way of existing financially. Running a bank account and paying bills by direct debit are probably second nature to most of us, but when you’re bankrupt you may not be eligible to hold a bank account at all.
When a customer becomes bankrupt, banks naturally want to protect their own interests and avoid liability for money withdrawn that should have been paid to creditors. For this reason your bank account is likely to be frozen and you’ll be unable to take any money out - the trustee typically claims any credit balance in the account as part of your estate. Further problems arise if the account is jointly held. Direct debits and standing orders might be missed, and the joint account holder may not be able to access their wages or other payments.
Prior to filing for sequestration it’s advisable to set up a new current account for yourself, and another for your partner or spouse if you hold a joint account. This allows them access to their own funds, and set up direct debits for household expenses if necessary. You wouldn’t be able to operate an overdraft facility on your own new account, however, as strict rules and regulations are in place in this regard, but it would allow your wages to be paid in by your employer.
A basic current account could provide a debit or cash card and potentially allow for electronic payments to be made, subject to available funds. It’s not profitable for banks to offer accounts with no overdraft or credit facilities, however, so you may need to shop around for an account with these limited features. But what if you can’t find a bank that offers a basic current account? How do you deal with the situation when your financial affairs still need to be managed?
Post Office Card Account If you can’t open a bank account whilst your bankruptcy order is in place, you may be able to open a Post Office Card Account. This is particularly useful if you receive Department for Work and Pension benefits, tax credits, and child benefit payments, as they can be paid in directly. This is essentially a cash-handling account, and services are only available at Post Office branches, although the contract between the Post Office and DWP is ending in 2021. The DWP do intend to put in place an ‘alternative payment service’ for those ineligible to open a bank current account at that time, however. Credit unions It would be worthwhile researching credit unions in Scotland to check whether any offer basic current accounts for people who have entered sequestration. Although account features vary between credit unions, they typically allow you to pay in wages, benefits, and tax credits electronically. You may also be able to set up direct debits and standing orders, withdraw cash over the counter or from a cash point, and pay money in over the counter. Pre paid card accounts Pre paid card accounts work like ‘standard’ current accounts but you can only withdraw the money that’s in your account. You can pay in your wages and benefits, set up direct debits, and there’s no credit check on account opening. Some of these accounts attract a number of fees, however, including:
It is possible to manage without a bank account when you’re in sequestration, but it always helps to plan in advance. Being aware of the limitations of bankruptcy is the first step, and can guide your actions in dealing effectively with the inevitable financial issues you experience in your daily life. If you have filed for sequestration and would like more guidance on how to manage without a bank account, our experts at Scotland Debt Solutions can provide reliable independent advice. We have a long track record of helping Scottish residents to escape debt, and can offer you a free same-day consultation at one of our network of offices throughout Scotland.
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