Rui Vieira/PA

The Co-operative Bank has closed its doors to bankrupt people today, blaming an uneven playing field in how the industry deals with insolvent consumers.

So what banking options are left to those forced into bankruptcy?


Only basic bank accounts without an overdraft facility are available to people recovering from bankruptcy. Few providers offer such accounts to this type of new customer, and now there is one less due the Co-op's latest decision.

From today the bank is no longer accepting new customers who are un-discharged bankrupts, but confirms that this does not affect the bank's existing customers.

It generally takes a year to been discharged from bankruptcy, which means customers in financial difficult are left with fewer options to help budget and manage their money.

"The Co-op basic bank account is the best known and most widely used account for people in bankruptcy, so this news really comes as a blow," explains Linda Isted, a spokesperson from debt charity, the Debt Advice Foundation. "Vulnerable people are now left with very limited options for banking."

Un-level playing field
The Co-op said it was forced to review its basic account and argues that all banks should work equally to offer help to those who have been financially excluded.

Defending the move, John Hughes, managing director of retail banking at The Co-operative Bank said: "Across the industry there has long been an un-level playing field in the provision of basic bank accounts, with our bank doing far more than most and we have been calling for some time for this to be addressed.

"Unfortunately it has now come to the stage where our disproportionate market share of the basic bank account market has continued to grow significantly, and regretfully, we now need to take steps to address this."

Options for bankrupts
With sky-high insolvency figures, clearly there is a need for an increase in basic bank accounts that accept un-discharged bankrupt customers. A staggering 299 people are declared insolvent or bankrupt in the UK every day, according to figures from Credit Action, and this is only set to worsen with 128 new people becoming unemployed each day.

Banking options are now very limited for bankrupt people, although there are still some solutions.

"Banks deal with bankruptcy on a case-by-case basis and customers are often able to carry on with their existing bank account, albeit with the overdraft removed and perhaps the debit card too," explains Sue Clay, a licensed insolvency practitioner with PJG Recovery Limited. "But remember these limitations only apply during the period of bankruptcy, which is usually 12 months."

Independent advice
If you are forced to leave your bank and go elsewhere, Barclays is now the only high street bank to officially offer free basic bank accounts to un-discharged bankrupts. Clay adds that there other commercial providers such as Secure Trust and Think Money that offer tailored accounts with prepaid credit cards for people in financial difficulty, although they levy a monthly charge of around £12-£14.

"We generally advise against these accounts because the last thing people in debt need is another month fee," says Isted. "The final option, if you have a very close stable partner or parents and you trust each other intrinsically, is to share their account without becoming a joint account holder."

Ultimately, it is crucial to seek free and independent financial advice as soon as you recognise that you are struggling financially. Don't rush into bankruptcy and take time to weigh it up against other debt solutions, such as an Individual Voluntary Arrangement (IVA) or Debt Relief Order (DRO) with an expert before making a decision.