PPI and Bankruptcy: Things you Need to Know

PPI and Bankruptcy

Payment Protection Insurance or PPIs are generally sold on loans, mortgages, or credit cards. This is a short-term income protection plan that would cover your loan repayments, in the case of any emergencies. If you get injured, sick or retire, then this PPI plan would cover your debt repayments. On the other hand, if you stop working or lose your job, then PPI works too.

However, if you have gone bankrupt, then you can claim mis-selling PPI. But, you have to keep dedicated rules and regulations in mind. When it comes to PPI and bankruptcy, you should inform the Official Receiver about getting a PPI before you were declared bankrupt. 

Mis-selling of such financial products might be owned by the trustee or the official receiver of the bankruptcy authority. Well, then how is PPI compensation dealt with in bankruptcy? Let’s find out.

How does the Official Receiver Handle the PPI Compensation?

All the entitled processes under PPI and bankruptcy are governed by the Insolvency Service in Wales and England. If any individual who falls victim to bankruptcy or signs for bankruptcy claims for mis-sold PPI, then the asset would be registered to the Official Receiver. Additionally, it would remain the same, if the policy is drained out way before the individual has been declared bankrupt. The claimant doesn’t receive the PPI claim as an asset. Meanwhile, the PPI compensation claim doesn’t get credited to the account of those who have been discharged from bankruptcy. 

Should you Claim Mis-Selling of PPI after you Go Bankrupt?

In case, you have already taken out the PPI policy before you go bankrupt, then there are hardly any chances that your claim would be supported as valid. After you go bankrupt, all your assets become owned by the trustee. And, if you gain anything from the claim of PPI and bankruptcy, then that asset goes to the Official Receiver or the bankruptcy estate.

How is PPI compensation dealt with in bankruptcy when anyone gets discharged from bankruptcy? Unless the official receiver has agreed to pay the asset back to you, the trustee stays the legal owner of that PPI compensation.

In Case you were Mis-Sold PPI

Talk to the trustee or the official receiver of the bankruptcy estate. You should not make any claim regarding your mis-sold PPI, without informing the official receiver, although you believe that the PPI policy was mis-sold to you.

What to do if you Have Already Claimed?

Whether you have made the claim to the concerned company or not, make sure that you have informed the official receiver, about every single step. Additionally, you must notify the company that you’re claiming against the bankruptcy process. Mostly, the company would credit the compensation related to PPI and bankruptcy to the trustee. And, if the company pays you, then you need to tell the trustee.

What if a Claims Management Company Contacts you?

There are high chances that a Claims Management company will connect to you and tell you that there is no connection between PPI and bankruptcy. And, you can claim if you were mis-sold a PPI. Most probably, they are misguided in this case. Once you receive similar notification from them, ensure that you tell the bankruptcy trustee or the official receiver, on the behalf of the trustee. Only, the trustee can tell you whether you’re free to make a claim or not.

On the other hand, in case you have reclaimed PPI through a claim management authority you have to pay them the charges. Moreover, things can get complicated due to the following instances:

  • The trustee can legally claim the charges that you pay to the company as a commission. And, the services remain unpaid as you are left with no money.
  • In addition to this, if you have claimed against the company who has been one of your creditors, then they can grab the compensation payment. It again goes to the account of what you still owe to them. This results in the failure of paying commission to the company. However, the entire process is called offsetting.

Circumstances might appear when you feel unsatisfied with the services from the Claims Management body. If it’s so, then you can register your complaints at the Claims Management Ombudsman. Don’t worry, the services are free for the sake of solving legal disputes regarding PPI and bankruptcy and related claims.

Are All other Windfalls Treated the Same When it Comes to Bankruptcy?

Hopefully, your query ‘how is PPI compensation dealt with in bankruptcy’ gets a clear concept. You can’t keep the claims from mis-sold PPI even when you are free from bankruptcy. But, when you consider anything similar to inheritance, or a lottery winning, then you can possess that. 

Obviously, you have to be discharged from bankruptcy, because the PPI was sold to you by mistake, or on your consent before you have been nominated as a bankrupt. Once you claim the mis-sold PPI, it directly benefits the bankruptcy trustee, not you.

However, if you inherit anything or earn money anyhow while the bankruptcy is still active, you are liable to inform the trustee about your gaining. Usually, all your inheritance or money goes to the trustee. The bankruptcy estate would use the extra money to declare you debt-free by paying them to your creditors.

Basically, lenders would use all your rewards or claims to reduce the debt over you, when you are under bankruptcy. That’s why mis-sold PPIs and other claims aren’t effective while you are talking about PPI and bankruptcy.

How can you realize that you have been Mis-sold PPI?

When you are applying for loans, credit debts or mortgages that have to be repaid, the creditors might attach a PPI scheme. It’s the responsibility of that company to help you understand what benefits you have got under your purchases. These are the possible ways through which you can be sold a PPI:

  • If the lender makes you believe that loans are incomplete without a PPI.
  • In case, the creditor asked you to get a PPI in the absence of the ‘demands & needs’ document.
  • The creditor hasn’t specifically disclosed the payments or commissions. 
  • If you are not liable to get benefit from PPI, as you are unemployed, retired or self-employed.

How can you Reclaim PPI?

If your trustee allows you to reclaim PPI and bankruptcy benefits, then you can proceed with the following process. Keep in mind that it’s only applicable for those victims who have mistakenly accepted a PPI scheme. You have to hire a Claims Management company to reclaim your PPI.

Moreover, the Claims Management authority generally charges its customers in return for the reclaiming service. The process is hassle-free and you would get the full compensation from the PPI reclaim.

Be Careful…

When you have been declared bankrupt, all monetary activities should be addressed to the bankruptcy trustee. Or else, the consequences can go severe. The bankruptcy trustee uses up all the claims and benefits of yours to pay off your debt. So, don’t claim your mis-sold PPI and bankruptcy benefits without informing the official receiver. Additionally, don’t forget to check the benefits or schemes covered by PPI schemes before you apply for one.