A guide to what happens to your PPI claim after you've been made bankrupt in England and Wales.
PPI is an insurance contract generally taken out when a loan or credit card is obtained. The law states that this contract is an asset in the bankruptcy, as is the right to complain if it was mis-sold.
You must tell the official receiver if you took out PPI before becoming bankrupt. This is because the right to make a claim comes into existence when the PPI or other product was originally mis-sold.
This is the same as other financial products which have been mis-sold including other loan and credit card protections, bank accounts, interest rate deals and loans.
Why the PPI mis-selling claim is paid to the trustee
As the PPI claim is an asset in the bankruptcy you no longer have a right to the money paid out. Instead the money will be paid to your trustee as part of your bankruptcy estate. This will happen even:
- after you have been discharged from bankruptcy
- if you didn’t know you could claim compensation until after your bankruptcy
- if the loan has been repaid in full
This money cannot be returned to you under any circumstances. Ill health or financial hardship does not entitle you to the money.
If you have a PPI claim
You must tell the official receiver if you think you’ve been mis-sold a PPI policy or if you have a claim in progress.
You must also tell the official receiver if you have previously made a claim and already received the money.
If you’re contacted by a claims management company
You do not need to process the claim yourself as this will be done by the Insolvency Service. If a claims management company contacts you and encourages you to make a claim you should decline and speak to the official receiver. You should do this even if they say your claim is not affected by your bankruptcy.
If you continue to make a claim after bankruptcy you may be responsible for paying the claim company’s fees and commission out of your own pocket. This is because your bankruptcy estate is entitled to receive all of the money.
For further information, contact the Insolvency Service PPI team.