Claiming PPI after Bankruptcy
Once you are discharged from bankruptcy you are no longer bound by the restrictions of a bankrupt person. One of the important elements of this is that from now on if you receive any windfalls these are yours to keep. If you inherit money or assets or win the lottery these funds do not have to be given to the Official Receiver.
Given this it seems logical that if you now make a claim for PPI mis-selling and you are awarded compensation you should keep this money. However this is normally not the case. This is because PPI compensation is considered an unrealised asset of your bankruptcy.
PPI is an Unrealised Asset of Bankruptcy
Within bankruptcy there is a rule concerning things known as Unrealised Assets. These are assets which you actually owned while you were bankrupt but for some reason were not dealt with by the official receiver at the time. Despite this they still form part of the assets included in your bankruptcy.
When an unrealised asset comes to light it must be handed over to the Official Receiver even if you are already discharged.
PPI claims are treated as unrealised assets of bankruptcy. This is because the ability for you to make a claim existed while you were bankrupt. As such if you make a claim after bankruptcy the bank is likely to hand any compensation you are awarded directly to the Official Receiver.
Will the Official Receiver let you keep any of your PPI Compensation?
You are not likely to receive any of your PPI compensation after it has been paid to the Official Receiver. This is the case even if the amount paid is more than your original debt. The reason for this is that in addition to repaying your original debts in full the OR is also entitled to pay their own costs.
In addition to the ORs costs which could be considerable your creditors will also be paid statutory interest of 8% a year from the date you went bankrupt. You will only receive cash if there is anything left over after all these payments have been made.
BE Tip: You can try to agree with the Official Receiver that they will share any compensation awarded with you. This would be on the basis that you take on the work of managing your claims. There is no guarantee that the they will agree to this but there is nothing to stop you giving it a try.
Can you claim for PPI against debt not included in your Bankruptcy?
You may have paid for PPI on debts that were paid in full before you went Bankrupt. As such these would not have been included in the process. You may think that you should be able to claim against these debts and be allowed to keep any compensation awarded.
Again this is not the case. Any PPI awarded is still an Unrealised Asset and is likely to be paid directly to the OR. This is because the opportunity to make your claim against these debts existed at the time you went bankrupt even though the debts were not included.
BE Tip: If you do make a claim in these circumstances the bank may not be aware that you were previously bankrupt. As such they may send any compensation directly to you. If this is the case you must inform the OR and hand the cash over to them.
Using a Company to claim for PPI after Bankruptcy
Once you have been discharged from Bankruptcy you may be approached by a claims management company who say they can help you to make PPI claims. If this happens it is important that you inform them that you are a discharged bankrupt. Once they understand that they may not be willing to take on your case.
If they still say that they can help it is vital that you agree with them that you will not be charged anything if compensation is paid to the OR rather than you. You must get this agreement in writing. If after this the company is still prepared to help you then you have nothing to lose by giving your claims a go.
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