With claims for PPI miss-selling on the increase we ask whether you can make a claim for miss-selling if you are bankrupt or have already been discharged from your bankruptcy.
If you are currently bankrupt or have been discharged from bankruptcy you may be thinking about making a claim for PPI that you feel you have been miss-sold.
In these circumstances, there is absolutely nothing to stop you making a PPI miss-selling claim.
However before you do so, you need to understand what will happen to any compensation money that you are awarded.
Making a PPI claim while still bankrupt
While you are bankrupt, any windfalls or payments you receive must be paid into your bankruptcy estate for the benefit of your creditors.
This means that if you successfully claim for PPI miss-selling and are awarded a compensation payment while you are bankrupt, this money must be paid in full to your creditors.
You are obliged to inform the official receiver 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.
However it is unlikely that you will have to worry about not telling the official receiver. If you are bankrupt it is likely that the bank which awards you money for PPI miss-selling will simply pay it directly to the official receiver anyway.
After discharge from bankruptcy
After you have been discharged from bankruptcy it s true to say that you are allowed to keep any windfall payments that you subsequently receive. The question is what is a windfall?
If you receive an inheritance payment which was not due to you while you were bankrupt or if you have a lottery win, this is certainly a windfall and you will be able to keep this money in full.
However a PPI miss-selling compensation payment is not treated as a windfall. It will be viewed as a refund for the money you paid for the insurance which was miss-sold to you.
The money you originally paid for your PPI is seen as contributing to the reason you went bankrupt. As such so any refunds in the form of compensation must be paid to the official receiver to be put towards repaying your debts.
You may ask how this can be if you have already been discharged from bankruptcy.
The answer is that even after you are discharged from bankruptcy your debt is not written off. A line is simply drawn under it. If any assets come to light in the future which should have been included in your bankruptcy, the official receiver has a right to take these from you.
As with people who are still bankrupt, in the case if a PPI miss-selling claim payment, the bank due to make the payment to you is likely to be aware that you are a discharged bankrupt and will normally pay any claim directly to your OR.
What if the original loan was not part of your bankruptcy?
If you feel that you were miss-sold PPI on a loan which you took and fully repaid before you declared yourself bankrupt, it is likely that even a compensation payment for this PPI will be payable to the official receiver.
This is because the official receiver or your trustee will argue that the loan and PPI which you paid in full was still a contributing factor to the reason you then went bankrupt.
Having said that, where this situation occurs it is less likely that the bank who must pay you compensation will be aware that you were bankrupt in the past.
As such it is possible that they will make any compensation payment directly to you and the official receiver will not discover this unless you tell them about it.
Is there any point in making a PPI claim if bankrupt?
The answer to this question will very much depend on your attitude to repaying your debt.
There is absolutely no reason why you should not make a claim if you feel that you have been miss-sold PPI.
However you need to understand that as a bankrupt or discharged bankrupt it is likely that you will not benefit from any compensation received. The people who benefit will be your unpaid creditors as a whole.
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 miss-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.
James Falla is a debt management solutions expert and author. He has fourteen years of experience of helping people with the process of declaring themselves bankrupt.
In 2004 James co founded Thomas Charles a specialist debt management solutions company where he personally helped hundreds of clients declare bankruptcy. James is now the managing director of and senior debt advisor for Wilmott Turner Financial Services which operates debt solution websites such as http://www.beatmydebt.com.
As well as appearing on numerous television and radio programmes such as the BBC 1 o'clock news, Sky News and BBC Radio's Wake Up to Money, James has written a well respected book about personal debt solutions: IVA, Bankruptcy and Other Debt Solutions. He continues to write widely on the subject of bankruptcy, individual voluntary arrangements and debt management plans.
By James Falla
If you are currently bankrupt or have been discharged from bankruptcy you may be thinking about making a claim for PPI that you feel you have been miss-sold.
In these circumstances, there is absolutely nothing to stop you making a PPI miss-selling claim.
However before you do so, you need to understand what will happen to any compensation money that you are awarded.
Making a PPI claim while still bankrupt
While you are bankrupt, any windfalls or payments you receive must be paid into your bankruptcy estate for the benefit of your creditors.
This means that if you successfully claim for PPI miss-selling and are awarded a compensation payment while you are bankrupt, this money must be paid in full to your creditors.
You are obliged to inform the official receiver 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.
However it is unlikely that you will have to worry about not telling the official receiver. If you are bankrupt it is likely that the bank which awards you money for PPI miss-selling will simply pay it directly to the official receiver anyway.
After discharge from bankruptcy
After you have been discharged from bankruptcy it s true to say that you are allowed to keep any windfall payments that you subsequently receive. The question is what is a windfall?
If you receive an inheritance payment which was not due to you while you were bankrupt or if you have a lottery win, this is certainly a windfall and you will be able to keep this money in full.
However a PPI miss-selling compensation payment is not treated as a windfall. It will be viewed as a refund for the money you paid for the insurance which was miss-sold to you.
The money you originally paid for your PPI is seen as contributing to the reason you went bankrupt. As such so any refunds in the form of compensation must be paid to the official receiver to be put towards repaying your debts.
You may ask how this can be if you have already been discharged from bankruptcy.
The answer is that even after you are discharged from bankruptcy your debt is not written off. A line is simply drawn under it. If any assets come to light in the future which should have been included in your bankruptcy, the official receiver has a right to take these from you.
As with people who are still bankrupt, in the case if a PPI miss-selling claim payment, the bank due to make the payment to you is likely to be aware that you are a discharged bankrupt and will normally pay any claim directly to your OR.
What if the original loan was not part of your bankruptcy?
If you feel that you were miss-sold PPI on a loan which you took and fully repaid before you declared yourself bankrupt, it is likely that even a compensation payment for this PPI will be payable to the official receiver.
This is because the official receiver or your trustee will argue that the loan and PPI which you paid in full was still a contributing factor to the reason you then went bankrupt.
Having said that, where this situation occurs it is less likely that the bank who must pay you compensation will be aware that you were bankrupt in the past.
As such it is possible that they will make any compensation payment directly to you and the official receiver will not discover this unless you tell them about it.
Is there any point in making a PPI claim if bankrupt?
The answer to this question will very much depend on your attitude to repaying your debt.
There is absolutely no reason why you should not make a claim if you feel that you have been miss-sold PPI.
However you need to understand that as a bankrupt or discharged bankrupt it is likely that you will not benefit from any compensation received. The people who benefit will be your unpaid creditors as a whole.
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 miss-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.
James Falla is a debt management solutions expert and author. He has fourteen years of experience of helping people with the process of declaring themselves bankrupt.
In 2004 James co founded Thomas Charles a specialist debt management solutions company where he personally helped hundreds of clients declare bankruptcy. James is now the managing director of and senior debt advisor for Wilmott Turner Financial Services which operates debt solution websites such as http://www.beatmydebt.com.
As well as appearing on numerous television and radio programmes such as the BBC 1 o'clock news, Sky News and BBC Radio's Wake Up to Money, James has written a well respected book about personal debt solutions: IVA, Bankruptcy and Other Debt Solutions. He continues to write widely on the subject of bankruptcy, individual voluntary arrangements and debt management plans.
By James Falla
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