PPI Claims after bankruptcy

Ok then PPI, (that is payment protection insurance) and bankruptcy, or more specifically reclaiming PPI and bankruptcy. Please note this is not about if you are eligible (in terms of if you have been miss-sold) as that is not my area and there is plenty of advice on that elsewhere, probably elsewhere on this site in fact. So for the purpose of this lets just assume that you have been miss-sold and that there is a potential to make a claim against a bank.

It has been asked many times recently if you can reclaim the PPI on credit agreements if you have been made bankrupt, and more importantly for some people, whether you can keep any pay out.
The first thing to understand is why a claim can be made in the first place. If it has been miss-sold to you then there has been damage caused to you estate (your finances) and so you had a right to take action in court to seek recompense. This is called a right of action. Next to look at is when this right came into being. It comes into being when you signed that contract where the miss-selling was done, from that point onwards the right or action (ROA) comes into being.

Next is to see how that ROA interacts with bankruptcy, when you go bankrupt it is the default position that all of your assets transfer to the trustee of your bankruptcy unless there is a specific provision otherwise (for instance there is a specific position that you get to keep all your basic living goods). Now in the definition of what is an asset in bankruptcy it includes “Things in action”. An ROA is a “Thing in action” and therefore is an asset.

So to summarise the ROA is an Asset and that asset is created when you signed the credit agreement. Being that in these instances the PPI claims we are talking about are all on credit agreements signed before the bankruptcy then these PPI claims are all assets and they all vest with the trustee of your bankruptcy.
This means that not only do you not have the right to receive the monies from any claim but that you also do not have the right to make the claim, That right passed to the trustee and so it is the trustees right whether to take it forward or not, the claim now belongs to them.

As far as I last heard the Insolvency service is trialling using a solicitors firm to take batches of these claims forward en masse to the banks and therefore if you have already made the claim and pocketed the cash there is a good chance that the IS will at some point try and cash in the claim and therefore realise that you already have. At that point they will have the option of recovering it from you.