Discharged bankrupt and PPI

Macca1982

Hi, I was always under the impression that a discharged bankrupt couldn't claim PPI but I had a letter from a PPI company today suggesting I could. Is this right?

dunstonh

Macca1982 wrote: »

Hi, I was always under the impression that a discharged bankrupt couldn't claim PPI but I had a letter from a PPI company today suggesting I could. Is this right?

No. The CMC is totally incorrect. Indeed, the regulator for CMCs has pointed this out several times. So, this would suggest you are being potentially mis-sold by the CMC.

You are able to raise a complaint (either directly or by a CMC if you find it too hard to put a stamp on an envelope). However, you are not allowed to personally receive the refund if your complaint is successful. It is classed as a pre bankruptcy asset and should be paid to the OR. The OR will distribute it to the creditors.

If you did use a CMC, they would still bill you against the refund even though you havent seen a penny of it. Although on complaint they would have to back down as they would have mis-sold you. Perhaps you could use a CMC to complain about the CMC mis-sale

[Deleted User]

Macca1982 wrote: »

Hi, I was always under the impression that a discharged bankrupt couldn't claim PPI

This is the truth, not just an "impression". Ignore letters which say otherwise.

Geoff1963

A government web-site explains that any money you successfully "claim", goes to your unpaid creditors. That might make you feel good ; maybe you'd prefer them to have the money, than the PPI-misseller. I can't post URLs, so you'll have to Google search on : .gov.uk bankruptcy ppi

The site doesn't explain what happens if the amount of PPI refund, with interest calculated up to the date of your bankruptcy, would have fully paid all those creditors, with some left over. The Insolvency Service won't tell me, but a bankruptcy can be "annulled" if it should never have been made. Someone clever than me might know.

In some cases, the PPI-miseller would have been the unpaid creditor, who triggered the bankruptcy. Rules which let them keep the ( net ) PPI refund, if they can withhold payment long enough ; would seem to encourage misbehaviour.

I'd welcome any thoughts on this.

Geoff1963

To dunstonh :

Can you explain a bit more what you mean by a "pre bankruptcy asset" ?
I think that is the principle which explains how the rules are derived.

Thanks

Geoff1963

< duplicated in error >

dunstonh

Geoff1963 wrote: »

To dunstonh :

Can you explain a bit more what you mean by a "pre bankruptcy asset" ?
I think that is the principle which explains how the rules are derived.

Thanks

If you later obtain funds or assets that result from a transaction from before bankruptcy then these are classed as pre-bankruptcy and you can't keep them.

PPI premiums paid before bankruptcy but getting refunded after bankruptcy are therefore classed as pre-bankruptcy and belong to the estate and should be distributed by the OR. In theory, any amount above the outstanding debt should be returned to you.

[Deleted User]

Geoff1963 wrote: »

Can you explain a bit more what you mean by a "pre bankruptcy asset" ?

It basically means as a bankrupt you won't get any PPI money refunded to you because it belongs to the Official Receiver for redistribution to your former creditors.

If you require more than the "Cliff notes", read here:
https://forums.moneysavingexpert.com/discussion/3766585

Geoff1963

"In theory, any amount above the outstanding debt should be returned to you."

This clause was very noticeable by its absence from the government web-site that I referenced. I think someone should tell them to add it.

[Deleted User]

Geoff1963 wrote: »

"In theory, any amount above the outstanding debt should be returned to you."

The chances of this being the case are very slim indeed.

In practice, no Bankrupt will receive a PPI refund unless in the unlikely event the PPI was taken out AFTER bankruptcy.

Read the link I provided earlier...

Geoff1963

The way I try to make sense of it, is :
1) The PPI payments were in the PPI-sellers possession, accumulating interest.
2) At some point the PPI-seller recognises the customer's ownership of them ( as if they had been paid into a deposit account that everyone had forgotten about ) and hands them over.
3) If the customer had in the meantime become bankrupt, it means that asset was mistakenly omitted from the settlement calculation, so the clock has to be wound back to the day of the bankruptcy.
If it were otherwise, a person who believed they might be due PPi would file for bankruptcy ; then after discharge, would make the claim. A bit unfair on the creditors.

However, I'm wondering if there is anything to stop the bankrupt customer telling the OR or their creditors, about the potential PPI claim ? They might be prepared give the customer a payment for the effort of doing the paperwork.