Bankruptcy banking: Can you find a current account?
You have made the tough decision to go bankrupt and have started the process. What next?
The whole point of bankruptcy is to give people a fresh start but until you are discharged, even doing something as simple as opening a bank account to pay your bills can be difficult.
Sarah Routledge looks at the banking options open to undischarged bankrupts.
Part of bankruptcy means your bank accounts will be closed. Most bank accounts offer an overdraft, and if this is necessary where a debit card or cheque book is offered.
But as an undischarged bankrupt - the 12 months after being declared bankrupt - most banks are unwilling to deal with you.
So what are the options, if all you want is a way to pay in your wages and settle bills?
Basic bank accounts
The government introduced basic bank accounts in 2003 in an attempt to tackle the problem of financial exclusion.
The good news is there are now some banks that will have you as their customer. The bad news is there are still only two.
The Co-operative Bank has Cashminder, while Barclays offers its a href="http://www.personal.barclays.co.uk/BRC1/jsp/brccontrol?site=pfs&task=homefreegroup&value=12866" target="_blank">Cash Card Account.
Although these accounts will need a credit check, being an undischarged bankrupt should not be a problem. It is recommended you check your credit report first to ensure there is no record of fraud, as this will get you turned down.
Neither banks charge for these accounts and both offer direct debits, a debit card and online banking. There is no overdraft available, however.
Barclays charges £8 for missed standing orders and direct debits, while the Co-op charges £19.50.
It is important not to open an account until you have been declared bankrupt, as it might be closed if you apply too soon.
Both banks say they are not sure why there are so few options for undischarged bankrupts.
"We think it's a good idea," a Barclays spokesperson says.
"It's one of the main ways for people to get back on their feet after financial difficulties."
A spokesperson from the Co-operative Bank adds: "We don't know for certain why some other banks don't offer it, but guess it's likely to be that it is unattractive business with no ability to cross sell other products.
"We choose to do it as a responsible provider and see having bank account as an important aspect of social inclusion."
Jessica Bown, from Talkaboutdebt.co.uk, says the situation is far from ideal.
"Since the government introduced basic bank accounts over half a million people have fallen into bankruptcy.
"For most this is a last resort, accompanied by a feeling of shame that is perpetuated because they are refused access to even the basic banking facilities necessary for modern life.
"By excluding them in this way, the banks are effectively treating them like criminals and making it harder for them to pick up the pieces of their lives and improve their financial situations."
Talkaboutdebt.co.uk is calling on UK banks to revise their practices by enabling undischarged bankrupts to receive basic banking facilities with an online petition.
A spokesperson for the British Bankers' Association (BBA) says: "Many of them [the banks] feel the risk inherent in providing for undischarged bankrupts is too great and that is a commercial decision that we would defend."
Managed bank accounts
There are bank accounts open to everyone - for a fee.
Think Bank offers a managed account, which could be very helpful for those on a tight budget.
There are two accounts - one in which your salary is paid into and all regular bills come out of. The remaining cash goes into the other account, which is linked to a Maestro card for spending.
The advantage is not having to worry about bills bouncing, or overdraft fees, and having a money manager on the end of a phone if you need advice.
However, there is a one-off set up cost of £25 which is taken from the first credit to be paid into your account, plus a monthly administration fee of £12.50.
Card One Banking offers a similar two-account product with a prepaid MasterCard, which works in the same way as a debit card.
There is an opening fee of £30 and the monthly fee is £12.50. This is an online account, but there is the option to pay into it by using the Post Office.
If you choose a managed account, not only will you have to pay a monthly fee, you will also forego earning any interest on your cash.
But if you can't get a basic bank account and you want to pay bills by direct debit and standing order, and have somewhere to pay in your salary, these accounts are worth considering.
Prepaid cards
Prepaid cards are a relatively new alternative to traditional banking, but they are gaining in popularity.
They work exactly the same as debit cards in ATMs and shops, but you can only spend the balance that has been loaded on the card.
It is possible to have your salary paid straight into the account, and you can even set up standing orders.
Although there is an identity check on these cards, there is no credit check so they are open to everyone. Some will also help rebuild your credit profile.
Prepaid cards have fees, however, so make sure you check the small print.
The cashplus prepaid gold MasterCard Deluxe is available for an opening fee of £4.95 and a monthly fee of £9.95. Withdrawals from ATMs in the UK are free, as are purchases in shops or over the internet, which makes this card suitable for everyday use and slightly cheaper than a managed account.
Standing orders are allowed, your salary can be paid in directly, and there is one per cent cashback on the first £1,000 spent, with 0.5 per cent available on all further transactions.
Other features include a credit builder and help in getting money back if a company you have bought from goes bust, helping this card to match the advantages with most debit and credit cards.
A word of warning - although the payday loan offered with this card may seem appealing, it comes with a startling 1737 per cent typical APR!
There are other cards available with no monthly fee, such as the Neon prepaid MasterCard, which is aimed at teenagers, but is free to use in shops and online, and has a low ATM fee of 99p per withdrawal.
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