Banks, Building Societies and Credit/Charge cards (ISCIS) 

Banks, Building Societies and Credit/Charge cards (ISCIS)

August 2010

Introduction

1. Official Receiver’s duties

One of the principal duties of the official receiver is to identify, collect, secure and protect any assets upon the making of an insolvency order. In some cases it may be necessary for the official receiver to give immediate notice of the insolvency order, by telephone, to any bank, building society and credit/charge card company where the bankrupt, company or partnership held an account. The giving of this early notice helps to ensure that funds in accounts do not disappear and additional credit/charge card debts are not incurred. Every effort must be made to obtain and quote account numbers.

In all other cases notice should be given, with full information, as soon as possible, by 1st class post, but in any event within 5 working days of the order being made. Full information should include address and postcode, branch sorting code and account number. For further information see Case Help Manual parts: Initial Enquiries and Initial Notices and Letters.

 

2. Company director’s, partner’s or bankrupt’s obligations

(amended February 2014)

The company director, partner or bankrupt must provide the official receiver with a full list of all assets and liabilities including details of any bank or building society accounts held. They must stop using their bank, building society, credit cards and similar accounts immediately upon the making of the order. They must also deliver to the official receiver any pass books and cheque books in their possession either at their first interview in the official receiver’s office or by post.

Bankrupts should be instructed to destroy any credit cards in their possession and dispose of the cards appropriately. They should also be instructed to refer to their bank for instructions on what to do with any debit cards in their possession. Any credit or debit cards issued to the bankrupt that are delivered to the official receiver should be destroyed and a file note made stating the card has been destroyed.

Company directors should be instructed to destroy all credit and debit cards issued to the company and dispose of the cards appropriately. Any credit or debit cards issued to the company that are delivered to the official receiver should be destroyed and a file note made stating that the card has been destroyed.  

 

3. Should the account be closed?

In, company, partnership or bankruptcy cases notice of the order will be given using form BANK1,2 or 3 (Docs tab).Options to cover the specific circumstances of each case will be offered. Where it is decided that the account should be closed and the balance (or sum of balances with one bank) is £50 or less, only the initial letter, possibly a telephone call to chase, and no more than one further follow-up letter should be issued to realise.

 

4. Can a bankrupt continue to use the account?

In many bankruptcy cases the official receiver may be content for the bankrupt to continue to use the account, subject to any bank/building society policy. This is most likely to occur where the bankrupt’s regular income is paid into the account. If a bankrupt proves to the official receiver that he/she needs the money or a proportion thereof for normal living expenses before the next "pay day", then he/she may be allowed to retain some or part of the funds for that purpose. Authorisation should be given to the bank, using form BANK2 (Docs tab), tailoring the letter according to the circumstances of each case. If the official receiver is not closing the account, i.e. where the account contains only wages or benefits received, the official receiver should not take possession of the bank card from the bankrupt, as it is for the bank in question to decide whether they wish to continue to deal with the bankrupt. Where the official receiver agrees to release only part of the funds in the account, he/she will need to decide whether to leave the bank card with the bankrupt. In order to protect the part of the balance he/she is claiming, if the bank card is left with the bankrupt, the official receiver can immediately telephone the bank to specify how much of the balance should be remitted to the official receiver, followed by a faxed letter to confirm this. The sum the official receiver intends to recover should be shown as the asset on ISCIS. The Asset Note should be used to record the detail of the arrangement i.e. how much was in the account and how much was agreed that the bankrupt could withdraw. See ISCIS Protocol Asset Recording.

 

5. Internet and telephone bank accounts

(amended February 2014)

It is becoming increasingly common for banks to offer on-line or telephone bank accounts. These enable the bank's customer to manage their account through the internet, using a password to access the account, or in the case of a telephone account by telephone using a pin number or security questions. The official receiver should not ask for details of the password, pin number or security information, or otherwise attempt to access the account through the internet or telephone. In a bankruptcy case the bankrupt should be instructed to refer to the bank for instructions on what to do with any debit or cash withdrawal cards for the account. In a company case the director should be instructed to destroy any debit or cash withdrawal cards for the account and dispose of the cards appropriately. Any cards for such accounts in bankruptcy or company cases which are delivered to the official receiver should be destroyed and a file note made stating that the cards have been destroyed. If the official receiver is closing the account, a note should be created to record the fact that the bankrupt/director has been told not to access these accounts via the internet or telephone.

 

6. Can a bankrupt open a bank or building society account?

A bankrupt may operate an account during the term of his/her bankruptcy. This may be necessary if, for example, wages or other regular income are only payable by credit transfer.

It is the bankrupt’s responsibility to make arrangements for dealing with such income and he/she should inform any bank or building society he/she approaches that he/she has been made bankrupt and remains undischarged from the proceedings. It is then at the discretion of the bank or building society whether to permit an undischarged bankrupt to operate an account.

You may refer the bankrupt  to the leaflet produced by the Service and available on the website at www.insolvency.gov.uk “What will happen to my bank account?”, which provides guidance regarding bank accounts.

Any request from the bankrupt or his/her agents regarding the operation of a new bank account can be answered using form BAOPB (Docs tab).

A bank or building society frequently asks the official receiver for authority to operate an account on behalf of a bankrupt. The official receiver is not in a position to provide such an authority and it is entirely a matter for the bank or building society to make that decision.

 

7. Building Society Accounts

Historically, the majority of accounts held at building societies were savings accounts. Today, current accounts held at a building society are more prevalent and should be treated in the same way as an ordinary bank account. Savings accounts usually have a pass book, although some are now card-operated. The building society will normally require the production of a passbook or card before releasing the balance to the official receiver. In the event that the passbook is not available to the official receiver, a ‘lost passbook declaration’ form will have to be signed by the official receiver as trustee. Usually the building society will also require a withdrawal form to be signed by the official receiver before releasing any funds.

 

8. Post office card account 

A post office card account is operated by J P Morgan Europe Ltd through the post office and can only be used to receive benefit, state pensions and tax credit payments. There is no overdraft facility on this account, and no other payments, such as wages, can be paid into it. No credit checks are undertaken when the account is opened. The official receiver will therefore have no interest in the balance of such an account and should not take the cash card for one of these accounts from a bankrupt.

 

9. National Savings and Investments Accounts (NS&I)

Various accounts are now offered which operate by passbook or cash card. Further information on the types of account now available can be obtained by visiting the website at www.nsandi.com. NS&I provide the form to enable passbook accounts to be closed and they will normally also require the return of the passbook. If the passbook is mislaid, inform NS&I and they will issue a different form to close the account. If the account is a card account, a letter claiming any balance on the account should be issued, together with a copy of the bankruptcy order.

 

10. Credit and Charge Cards

Any credit or charge card companies should be included in the list of creditors on ISCIS Creditors tab. It is important to notify the credit and charge card companies where the company/bankrupt held an account especially if that company or bankrupt had facilities for accepting payment for goods or services by credit/charge card. Notice of the order, form NORD1 (Docs tab), quoting the account number, wherever possible, should be sent to the relevant credit/charge card companies.

Where there are pre-paid cards which could still have funds credited to them, the official receiver should realise any balance by contacting the card provider. Some providers may charge a termination fee when the account is closed but details of how to obtain any balance in an account will be specified in the terms and conditions of the agreement.

 

11. Destruction of cards

Destruction of any type of card should be carried out by an examiner in the presence of the company director, partner or bankrupt. The examiner should make a record of the destroyed cards in the additional information schedule and make a file note recording the destruction. In the unlikely event that a card has not been ‘spoiled’, the examiner should be referred to for further instruction.

 

12. Returning cards and imprinting machines

If approached by the issuer, cards should be returned, if held, and in appropriate circumstances the metal plate from the imprinting machine should also be returned.

 

13. Joint accounts

If the bankrupt operated a joint account, the official receiver as trustee is entitled to claim half of any credit balance unless it can be proved that the funds specifically belong to either account holder. The consent of the joint account holder is required when dealing with these type of accounts.

 

14. Deceased Insolvent’s joint account

When there is a credit balance in a joint account of a deceased insolvent’s estate, the funds “owned” by the deceased are an asset of the deceased insolvent’s estate.

 

15. Can bank statements be obtained? (inserted April 2012)

It is possible that copy bank statements will be needed as part of the asset realisation/investigation process.  The Service has an agreement with certain banks/building societies, that requests for copy statements will be sent centrally by Official Receivers’ Business Support (ORBS) on a fortnightly basis.  Copy bank statements can be requested following guidance in the Technical Manual Chapter 31.5, paragraph 31.5.20A. 

 

Notes

a) Do not issue a standard letter to the bank in the event that a foreign bank account is identified as the cost of translating a reply could be prohibitive. Refer the matter to an examiner for instruction.

Where can I find out more?

Insolvency Act 1986:

Section 289              Investigatory duties of official receiver

Sections 291/333      Duties of bankrupt

Section 235              Duty to co-operate

Technical Manual

Chapter 3 part 3 Initial enquiries, initial notices and letters (winding-up order)

Chapter 4 part 3 Initial enquiries, initial notices and letters (bankruptcy order)

Chapter 31.5 Monetary Assets

Case Help Manual

Initial Enquiries 

Initial Notices and Letters 

Insolvency Service Leaflet

Guide to Bankruptcy - Section 6 What are your duties as a bankrupt?

                             - Section 8 What are the restrictions on a bankrupt?

What will happen to my bank account? 

Forms to be used:

NORD1 Notice of order

BANK1 Bank letter (1)

BANK2 Bank letter (2)

BANK 3 Bank letter (3)

BAOPB Bank Account, operation by bankrupt

ISCIS Protocols

Asset Recording

 

Banks, Building Societies and Credit/Charge Cards Flowchart 

 

Procedure

1 Where instructed by examiner to make contact immediately, telephone bank, building society, credit/charge company/ies. Full information should include address and postcode, branch sorting code and account number.

2 Telephone the bank, building society or credit/charge card company/ies and give them verbal notice that a bankruptcy/winding-up order has been made against their customer. Create a general Note and record details on ISCIS including name of person spoken to, date and time of call.

In all other cases, but in any event within 5 working days, notice must be given by 1st class post, of the order.

Banks

3 On examiners instructions, notice of the order will be given using one of the available bank account letters, depending on the specifics of each individual case. Full information should be given, including address and postcode, branch sorting code and account number.

If the balance (or sum of balances with one bank) is £50 or less, only the initial letter, possibly a telephone call to chase, and no more than one further follow-up letter should be issued to realise.

4 A bankrupt may operate an account during the term of his/her bankruptcy. This may be necessary if, for example, wages or other regular income are only payable by credit transfer. Any request from the bankrupt or his/her agents regarding the operation of a bank account can be answered using form BAOPB (Docs tab).

5 If the bankrupt operated a joint account, write to the bank requesting they remit the agreed proportion of the credit balance to the official receiver and the remainder to the non-bankrupt joint account holder.

Enter any subsequent realised value against the asset as recorded on ISCIS. See Asset Recording Protocol.

Internet and telephone bank accounts

(amended February 2014)

7 The official receiver should not ask for details of the password, pin number or security information, or otherwise attempt to access the account through the internet or telephone. In a bankruptcy case the bankrupt should be instructed to refer to the bank for instructions on what to do with any debit or cash withdrawal cards for the account. In a company case the director should be instructed to destroy all debit or cash withdrawal cards for the account and dispose of the cards appropriately. Any cards for such accounts in bankruptcy or company cases which are delivered to the official receiver should be destroyed and a note made on ISCIS stating that the cards have been destroyed.   If the official receiver is closing the account, a note should be made on ISCIS stating that the bankrupt/director has been told not to access these accounts via the internet or telephone.

Building Societies

8 If instructed to realise monies held in a Building Society/National Savings and Investments account, obtain passbook and request account to be closed and funds remitted to the official receiver. Enclose a copy of the bankruptcy order. If no passbook is available, request "lost passbook declaration" and "withdrawal" form from the society concerned, for signature by the official receiver as Trustee. If a card account, write and claim funds as agreed, enclosing copy of bankruptcy order.

9 If the account is a joint account, obtain a "withdrawal" (and "lost passbook declaration" form, if required) from the building society, since the joint account holder will need to consent to the withdrawal of funds.

10 Send the withdrawal form (and lost passbook form, if appropriate) to the joint party for their signature(s)/ consent.

11 Upon return of the duly signed form(s), have the official receiver sign the form(s) as trustee.

12 Send to building society with a copy of the bankruptcy order, requesting that the agreed proportion of the balance be paid to the official receiver with the remainder to be forwarded to the joint party.

13 Enter any subsequent realised value against the asset as recorded on ISCIS.

Credit/ Charge/ Debit/ Cheque Guarantee/Cash Cards

14 Ensure the card company/ies are included in the list of creditors in ISCIS, making a note of the account numbers.

15 If not already done so, send notice of the bankruptcy order or winding-up order, form NORD1 (Docs tab) to the card company/ies.

16 Ensure the card company/ies are included in the list of creditors in ISCIS, making a note of the account numbers.

17 If not already done so, send notice of the bankruptcy order or winding-up order, form NORD1 (Docs tab) to the card company/ies.