Mis-sold PPI and Bankruptcy – To Claim or Not To Claim?
Many people who were mis-sold PPI ( payment protection insurance) have also gone through bankruptcy. I’ve seen loads of questions on consumer action advice blogs about whether bankrupts should file a mis-sold PPI claim. The answer is – yes, no or maybe – it depends on your circumstances both when it was sold to you and now.
Let’s look at a few different circumstances to get an idea of when it’s a good idea to file for a mis-sold PPI claim post-bankruptcy:
MAKE A CLAIM – If your PPI claim is greater than your debts owing under the bankruptcy, it may be worthwhile to file a claim. When your PPI refund is received, it will be taken by the trustee and applied to your debts and you should receive the overage. For instance, if your debts are £15,000 and your mis-sold PPI redress would be £22,000, then filing is a good idea – you can wipe clean your debts and have a nice little chunk of change left over for yourself.
DON’T MAKE A CLAIM – If you have more bankruptcy debts than potential mis-sold PPI claim refund, and your debt has been discharged, don’t bother filing. Because the PPI redress is considered an asset, it will be applied to your outstanding bankruptcy debts, even if your bankruptcy has been discharged, and you will get none of the refund, so it’s not worth your time.
MAKE A CLAIM – If you are operating under an Income Payments Order (IPO) or Individual Voluntary Arrangement (IVA) where your spare income is applied to your debt, I would make a PPI refund claim, even if it is less than the debt owing. Reason is, if you apply the mis-sold PPI reimbursement to the outstanding debt, the faster your order will be paid out and the less of your current income you’ll lose to pay creditors under the order.
DON’T MAKE A CLAIM – If you had mis-sold PPI on your mortgage and your home was taken in the bankruptcy and your potential claim is less than your total outstanding debt, I wouldn’t bother with a PPI claim – it will just be taken by the trustee and shared among your creditors.
MAKE A CLAIM – If you were mis-sold PPI after you declared bankruptcy, you should definitely make a claim. Only PPI on accounts held prior to the bankruptcy declaration date are able to be taken by the bankruptcy trustee. Even if you still had balances owing from bankruptcy accounts, the PPI claim money should be yours to keep.
DON’T MAKE A CLAIM – If you’re not in bankruptcy, but are in default with the bank that mis-sold you PPI and the potential claim amount is equal to or less than the amount you owe the bank, you may not want to bother. They will simply apply the refund amount against your owing balance.
MAKE A CLAIM – If you’re not in bankruptcy, but are in default with the bank that mis-sold you PPI and either your potential claim amount is more than you owe them or you want to use the PPI claim to pay off the debt to clean up your credit, go ahead and make the claim. This can improve your credit standing and if the claim is more, you should get the difference between the default and the refund!
The UK Insolvency Service advises anyone in bankruptcy to contact their trustee or official receiver prior to making a claim. Technically, the right of claim for mis-sold payment protection insurance belongs to the trustee, but they should want you to file it because it will help pay off your creditors.
Martyn Saville of consumer advocate Which? advises, “Anyone who’s currently in a debt solution such as an IVA should not bank on receiving a PPI refund in cash. However it’s still worth putting in a claim if you think you’ve been mis-sold. A mis-sold PPI refund could get you out of debt quicker, reduce your arrears and help rebuild your credit record.”
Just because you’re operating under a bankruptcy order, repayment order or debt arrangement of some type does not mean you should not apply for your mis-sold PPI claim. Consider your circumstances, talk to your trustee and then apply if it makes sense to either give you some pocket money or pays down debt in a way that’s beneficial to you!
Empire Claims is the #1 choice for recovering money you are owed for PPI products, bank and credit card charges. Their No Win No Fee philosophy means you don’t pay a penny if they don’t win your claim. If you believe you’re owed a claim from your bank, lender or other creditor contact Empire Claims to get help right away!