Cashing PPI cheque when bankrupt...

LaVey

Hello chaps,

Hypothetically, can someone tell me what would happen if someone who's been declared bankrupt/discharged puts a PPI claim in and then spends the payout money without realising it's owed to the Official Receiver?

Thanks in advance.

antrobus

LaVey wrote: »

Hello chaps,

Hypothetically, can someone tell me what would happen if someone who's been declared bankrupt/discharged puts a PPI claim in and then spends the payout money without realising it's owed to the Official Receiver?

Thanks in advance.

Hypothetically, they'd be comtting an offence under the Insolvency Act 1986. Seven years is the maximum penalty I think.

LaVey

Thanks for getting back so soon mate.

My cousin received a cheque yesterday and very nearly banked it before speaking to me! I knew there'd be some kind of penalty, just didn't know how severe. I thought maybe a repayment plan could be set up with it not being an intentional act of fraud, so to speak.

Cheers for your help.

dunstonh

I thought maybe a repayment plan could be set up with it not being an intentional act of fraud, so to speak.

Nope. He should not attempt to spend it or gain benefit from it (which can include paying it into an account if the bank is likely to eat the money up and not allow it to be withdrawn). He has a legal duty to inform the OR that he has been paid the money. The OR will then give him instructions on what to do.

The lender should have actually sent the money direct to the OR but it doesnt always happen. Lenders records may not show he was bankrupt or human error could occur.

LaVey

Thanks for your reply mate. I'll pass your advice on.

dunstonh

One last thing, if all his debts were settled in full or the refund is greater than the debts not paid, then the OR will normally agree for only the amount to clear debts to be taken.

Failing to disclose details of estate is a criminal offence. Whilst some people will get away with it, often these things get found out sooner or later. Some banks check on bankruptcy later rather than straight away and will notify the OR later. Even the FOS notifies the OR (just read a case of the prosecution of someone for failure to notify and it was the ombudsman who notified the OR and that was 4 months after the payout - he lost the money, got a fine, got a criminal record, community service and a suspended sentence).