Another reason not to go bankrupt

Posted by Ian Carpenter in Declined Credit on 18 September 2012 - Ian is Operations Director at checkmyfile

The process of entering into a bankruptcy – whether forced or voluntary – is a difficult scenario for thousands of people in the UK each year, but the decision by the Co-operative Bank (Co-op) to stop offering bank accounts to undischarged bankrupts could be about to make things a whole lot worse.

Many news outlets would have you believe that the UK’s economy is spiralling out of control, but a steady fall in bankruptcy orders in England and Wales since 2010 suggests that fewer people are finding themselves on the brink. Despite this, the move by Co-op is sure to affect the thousands of individuals that will enter into bankruptcy before the end of the year.

The decision by the Co-op leaves Barclays as the only provider bank accounts for undischarged bankrupts. The Co-op has assured existing customers that they will not be affected. Barclays has not yet followed suit and appears to be willing to continue offering basic banks accounts, which offer limited facilities and no overdraft. The accounts, some of which include a debit card, have no monthly fee and are hugely important factor in allowing bankrupts to re-build their financial position, however long that might take.

Managing Director of retail banking at the Co-op, John Hughes, has defended the move, explaining, “Across the industry there has long been an un-level playing field in the provision of basic bank accounts, with our bank doing far more than most, and we have been calling for some time for this to be addressed. Unfortunately it has now come to the stage where our disproportionate market share of the basic bank account market has continued to grow significantly, and regretfully, we now need to take steps to address this.”

There has long been a social stigma associated with bankruptcy and the imposed financial restrictions can affect people for many years, even after they have been discharged. The impact can be long-standing, with bankruptcies remaining on credit files for 6 years, and on Land Registry records for a further 6 years.

If you’re on the verge of going bankrupt, things could be about to get worse.

Ian Carpenter is Operations Director at checkmyfile, has a degree in Business Studies, and is a Graduate Member of the Institute of Credit Management. He can be contacted at ian.carpenter@checkmyfile.com

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