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PPI claims after bankruptcy

This advice applies to Wales

If you've been declared bankrupt or been discharged from bankruptcy, there are special rules around claiming for payment protection insurance (PPI) mis-selling.

This page explains the rules around whether you can claim for PPI mis-selling during and after bankruptcy.

PPI explained

Many loans and finance agreements have insurance which covers your payments if you stop work because of illness, an accident, you become disabled or you lose your job. This is called payment protection insurance (PPI).

Many people were sold PPI policies that weren't suitable for them, which means they can make a claim against the finance company for mis-selling.

More about PPI and mis-selling.

Can you make a PPI mis-selling claim after bankruptcy?

If you took out a PPI policy before you went bankrupt, you're highly unlikely to be able to make a claim or to keep any money that comes out of a claim.

This is because if a PPI policy was mis-sold before you were made bankrupt, any claim or potential claim connected to it is counted as an asset. This means it's owned by the official receiver or the trustee, not by you, and is part of the bankruptcy estate.

If you've been discharged from bankruptcy, this doesn't change the situation. The official receiver or trustee still owns the right to claim and any money that results from a claim, unless they've agreed to transfer the right back to you.

If you think you were mis-sold PPI

If you think you were mis-sold a PPI policy, you should tell the official receiver or trustee. You must not attempt to make a claim for mis-selling without first checking with the official receiver or trustee.

If you've already made a claim

If you've already made a claim about a mis-sold PPI policy, you must tell the official receiver or trustee of the claim. You also have to tell the company you're claiming against about your bankruptcy. It's highly likely that any payout will be made directly to the official receiver or trustee, and not to you. If it is made to you, you must tell the official receiver or trustee.

If you've been contacted by a claims management company

Be very wary if you're contacted by a claims management company, especially if they tell you that your bankruptcy doesn't have any bearing on whether you can make a claim for PPI mis-selling. It is highly likely that they're wrong. You should contact the official receiver or bankruptcy trustee, who'll be able to confirm whether or not you're allowed to claim.

If you've already started or made a PPI reclaim using a claims management company, you should be aware that you may end up being liable to pay the company's commission or fee out of your own pocket. This could be for one of two reasons:

  • the official receiver or trustee may be able to claim the whole amount of the payout as part of the bankruptcy estate, leaving no money to pay the commission
  • the finance company you've claimed against is one of your creditors - if this applies, they have the right to take the compensation payment and hold it against what you owe them. This is called offsetting and could mean there's no money left to pay the commission.

If you're unhappy about the service you receive from the claims management company, you can complain to the Legal Ombudsman. They're a free, independent, impartial scheme to help resolve legal service disputes.

Do the same rules apply to other windfalls?

If you come into money after you've been discharged from bankruptcy, for example through an inheritance or lottery win, you can normally keep it. A PPI reclaim payment is treated differently from a windfall like this. This is because if a PPI policy was mis-sold before you were made bankrupt, any claim connected to it is counted as an asset, so is owned by the trustee, not by you, as part of the bankruptcy estate.

If you come into money before you're discharged from bankruptcy, you have to tell the trustee. This normally becomes part of the bankruptcy estate, so the trustee will take control of it and usually use it towards paying your debts.

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