Introduction
i 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. Some banks have central contact points, details of which may be found on the OROS Intranet site under Banks. Sorting codes can be obtained by visiting http://www.sortingcodes.co.uk/
For further information see Case Help Manual parts Initial Enquiries and Initial Notices and Letters
ii Bankrupt’s, partner’s and company director’s obligations
The bankrupt, partner or company director 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, cheque books or credit/ charge cards in their possession either at their first interview in the official receiver’s office or by post.
iii Should the account be closed?
In bankruptcy, company or partnership cases, if the official receiver is content that the account is to be closed, notice of the order will be given using form BANK1 (DO73). This form also gives the option to ask the bank to:
a) Close the account
or
b) Close the account and remit the credit balance on the account
or
c) Provide further information
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.
iv 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 (DO73), 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. A note should also be made on LOIS (CA08) of the agreement reached with the bankrupt as to the amount of the balance that the bankrupt may withdraw.
v Internet and telephone bank accounts
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. If the official receiver is closing the account, all debit or cash withdrawal cards for the account should be taken from the director or bankrupt, and a written record should be made that he/she has been told not to access these accounts via the internet or telephone. If in a bankruptcy the official receiver is not closing the account he/she should not take possession of the bank card(s).
vi 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.
Any request from the bankrupt or his/her agents regarding the operation of a new bank account can be answered using form BAOPB (DO73).
A bank or building society may ask 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.
vii 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.
viii Post office card account
A post office card account is operated by Citibank International PLC 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.
ix National Savings and Investments Accounts
Various accounts are now offered which operate by passbook or cashcard. Further information on the types of account now available can be obtained by visiting the website at http://www.nsandi.com/ . National Savings and Investments 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 National Savings and Investments 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.
x Credit and Charge Cards
Any credit or charge card companies should be included in the list of creditors. 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 (DO73), quoting the account number, wherever possible, should be sent to the relevant credit/charge card companies.
xi Destruction of cards
Destruction of any type of card should be carried out by an examiner in the presence of the bankrupt, partner or company director. The examiner should make a record of the destroyed cards in the additional information schedule. All ‘spoiled’ cards should be kept together in an envelope and stored on the office file. Any card that has not been ‘spoiled’ should be referred to the examiner.
xii 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.
xiii Joint accounts
If the bankrupt operated a joint account, the official receiver as trustee is entitled to half of any credit balance unless the funds can be traced as specifically belonging to either account holder. The consent of the joint account holder to this treatment of the balance should be obtained.
xiv Deceased Insolvent’s joint account
When there is a credit balance in a joint account of a deceased insolvent’s estate, the surviving joint account holder is entitled to keep the monies according to the right of survivorship.
Notes
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
OROS Bulletin 3/05 – paragraph 12
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)
Case Help Manual
Insolvency Service Leaflet
Guide to Bankruptcy - Section 6 What are your duties as a bankrupt?
- Section 10 What are the restrictions on a bankrupt?
What will happen to my bank account?
Notices
T45/04 - Dealing with Assets: Part 2: Bank/Building Society Accounts
Forms to be used:
NORD1 Notice of order
BANK1 Bank letter (1)
BANK2 Bank letter (2)
BAOPB Bank Account, operation by bankrupt
LOIS WORKBOOK - Initial Notices and Letters
Click HERE to view the Flowchart for Banks, Building Societies and Credit/Charge Cards
Procedure
LOIS Screen references are given in brackets e.g. (DO73)
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. Some banks have central contact points, details of which may be found on the OROS Intranet site under Banks. Sorting codes can be obtained by visiting http://www.sortingcodes.co.uk/
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. Record details on LOIS Screen 8 (CA08), 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.
3 If the official receiver is content that the account can be closed and on examiners instructions, notice of the order will be given using form BANK1.
Full information should be given, including address and postcode, branch sorting code and account number.
BANK1
This form gives the option to ask the bank to:
a) Close the account
or
b) Close the account and remit the credit balance on the account
or
c) Provide further information
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.
BANK 2
If the official receiver is content for the bankrupt to continue to use the account and subject to bank policy, form BANK2 (DO73) can be issued notifying the bank of the order. Options are available on this form to release part or all of the funds. 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.
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 (DO73).
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.
6 Note screen 15 on LOIS of any realisations (CA15).
Internet and telephone bank accounts
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. If the official receiver is closing the account, all debit or cash withdrawal cards for the account should be taken from the director or bankrupt, and a written record should be made that he/she has been told not to access these accounts via the internet or telephone. Note LOIS (CA08). If in a bankruptcy the official receiver is not closing the account he/she should not take possession of the bank card from the bankrupt.
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 Note screen 15 on LOIS of any realisations (CA15).
Credit/ Charge/ Debit/ Cheque Guarantee/Cash Cards
14 Receive ‘spoiled’ cards from examiner.
15 Ensure the card company/ies are included in list of creditors, making a note of the account numbers on LOIS (CA31).
16 If not already done so, send notice of the bankruptcy order or winding-up order, form NORD1 (DO73) to the card company/ies.
17 Place spoiled cards in an envelope and store on the office file.