Bankruptcy and PPI Claims
There still seems to be a lot of questions and confusion over being bankrupt, or having a bankruptcy discharged, and being able to reclaim miss-sold PPI/Payment Protection Insurance.
I hope this below will help and much of it comes from the government's insolvency service.
Bankruptcy and PPI
I have been receiving more and more queries about people that have gone bankrupt and are looking to reclaim mis-sold PPI, or payment protection insurance.
There have been many opinions on this, one is that if the bankruptcy has been discharged, it is over and any PPI claim funds should belong to the bankrupt. However there are and have been differences on this topic.
I recently saw and read, where the government’s insolvency service have addressed this in a comment or article on their web site, and they are quite clear on the matter.
Here is basically what they have stated:
A PPI mis-selling claim: a bankruptcy asset
Following provisions of the Insolvency Act 1986, The Insolvency Service takes the view that if a PPI policy was mis-sold before the date of an individual’s bankruptcy, any claim relating to the alleged mis-selling of the policy is owned by the official receiver or trustee of the bankruptcy estate, not the individual to whom the policy was sold.
Discharge from bankruptcy does not alter the position
Discharge from bankruptcy does not alter this position. Discharge does not operate to transfer unrealised assets, including PPI mis-selling claims, back to the individual.
Considering a PPI mis-selling claim: refer to the official receiver or trustee
If a (former) bankrupt considers that a PPI policy was mis-sold, they should not attempt to pursue a mis-selling claim without reference to the official receiver or trustee.
If a claim has already been made, the official receiver or trustee should be informed of the claim and the person against whom the claim is being made should be informed of the bankruptcy
Use of claims management companies
The Insolvency Service is aware that some (former) bankrupts have used claims management companies to pursue PPI mis-selling claims for them. If these services are used after the date of the bankruptcy order, it is possible that the individual will remain responsible for all or part of the commission charged if an award is paid to the official receiver or trustee. This may be because the amount of the commission is challenged by the trustee or if the firm against which the award is made is a creditor in the bankruptcy and exercises a right to set-off the award against its claim in the bankruptcy. This could result in no payment being made from which the commission could be paid.
As such, care should be taken before acting in this way.
Best course of action: contact the official receiver or trustee
The best course of action for any individual contemplating making a PPI mis-selling claim who is or has been affected by bankruptcy is to contact the official receiver or trustee dealing with their case before proceeding further.
This is some serious stuff. It basically is stating any PPI claim belongs to the bankruptcy, and if you have a claim in, or are considering a PPI claim, you need to contact the OT or Trustee, regardless of being discharged or not.
In addition, if you use a service, you may be held liable for any fees involved as the entire claim can be taken for the bankruptcy.