If you have been insolvent – bankrupt, had an IVA or a Debt Relief Order (DRO) – then you need to know how this affects a claim for a refund for a financial product.
You can’t make a new claim for a PPI refund – the deadline for this passed at the end of August 2019.
But you can still make affordability complaints and other sorts of compensation eg for packaged bank accounts.
New credit after your insolvency finished
If you became bankrupt or started an IVA or a DRO a long while ago and afterwards took out a loan, your old insolvency doesn’t matter.
Any refunds on credit taken after your insolvency finished will come to you.
This also applies in the rare situation that you carried on paying PPI premiums on a mortgage after your insolvency. Here a PPI refund should be split, with the portion before your insolvency going to the Official Receiver and the portion afterwards coming to you.
Refunds & bankruptcy
When you go bankrupt, all your assets belong to the Official Receiver, except for things such as clothes, normal domestic items etc. Refunds are classified as an asset, even if you haven’t yet started a claim. As a result, if you do make a claim, all the money will go to the Official Receiver not to you.
This also applies after you are discharged and after any Income Payment Agreement is ended. It also applies if the debt was repaid before you went bankrupt so it wasn’t included in your bankruptcy. So if you have been bankrupt, don’t bother making any claims about any loans that were taken out before your bankruptcy.
Refunds & Debt Relief Orders
In a Debt Relief Order your assets do not become the property of the Official Receiver. You can therefore theoretically try to make claims for refunds at any point.
It is important however that you do not make a claim whilst you are in the 12 month ‘moratorium period’ as if it is successful your DRO may be revoked. This may not happen with a small refund, but it’s not worth the risk – just don’t make a claim until your DRO has ended.
After your DRO has completed, most advisers think it is safe to apply for a refund. I have never heard of anyone having had a problem who has done this.
BUT if the refund relates to a debt which was included in the DRO the creditor may choose to offset the refund against the debt – even though you think your debt has been written off at the end of the DRO.
I know some debt advisers don’t think there should be a “set off” in this situation, but you won’t win a case if you complain to the Financial Ombudsman about this.
Refunds & IVAs
The right to make a claim for a refund is an asset that became part of the IVA at the start. It doesn’t make any difference if the debt you want a refund for was repaid before your IVA started – the right to make the claim is still an asset which you owned when you started your IVA.
The majority of IVA firms try to reclaim any mis-sold PPI compensation before completion and you are usually obliged by the terms of your IVA to help with this process, for example by completing the necessary forms. If you don’t understand why your IVA firm is entitled to do this, ask them to explain, showing you which clauses in your IVA are relevant. They are probably right, but you have a right to know why.
After your IVA completes, the Court of Appeal decision in Green v Wright, published in March 2017, determined that a PPI reclaim after an IVA completion certificate issued should be paid to the IVA firm to go to the creditors, not to the debtor. See PPI Claims after your IVA ends for more details.
As a general rule of thumb, it is probably pointless to make a PPI or any other refund claim during or after an IVA has completed as any refund will not be paid to you.
Claims companies – don’t use them!
It is really important that if you have been insolvent when you make a mis-selling claim, you do it yourself and don’t employ a claims firm to help. If the end result of your claim is that compensation is paid to the Official Receiver or to your IVA firm, or it is ‘set-off’ against an old account, you will not receive a cheque. But you will still owe the claims company their percentage of the compensation as their fee – so your situation would be worse as you would then have a new debt!
Get a refund from large loans?
How to use a credit builder card
Consolidating with bad credit?
elaine says
I was discharged from bankruptcy in 2010 I just claimed ppi and they have sent it to solvency the loans I took out in 2002 and 2004 how can they class it as assets which I did not know about it at the time
can I challenge them to refund me.
Sara (Debt Camel) says
Legally it was an asset when you went bankrupt because you could have made a PPI complaint then. At that point PPI claims were being made – though they certainly weren’t as common as they are today!
I am sorry but you won’t be able to challenge this.
helen fowle says
a friend of mine had an IVA years ago and has now paid off any money she owed so now all accounts are cleared and closed she wants to know can she claim for any PPI that she maybe owed by various companies I will put my name for reply as she can not do the internet
Sara (Debt Camel) says
It depends on how long ago her IVA ended and what attitude her IVA firm takes in this situation. Some will reopen the IVA and claim the refunds. But if it is a very long while ago they may not.
Charlotte Brown says
Hi, we’ve had a successful PPI claim but still have nine IVA payments to make. Should this amount come directly off the set amount agreed to repay or can it go towards the rest of the debt that has been written off?
The IVA company has said that it ‘will be distributed amongst [our] creditors’ but haven’t reduced either monthly payments or the length of the agreement.
Thanks.
Sara (Debt Camel) says
This is making extra payments to your creditors. It doesn’t reduce what you have to pay because in an IVA you agree to make the monthly payments you can afford. If you earn more, you pay more. If extra payments are made, you still have to carry on making the rest of the payments because you can afford to.
The only exception here is that you can’t pay more in total than the full value of your debts plus the IVA fees (and in some IVAs plus statutory interest). But unless your PPI payment is huge that probably isn’t relevant.
Keith says
Hi Keith here,
I was in a DRO and it was clear a year or so ago, and have tried over the last few months to try and get PPI and it seems, for being honest, I am getting penalised and refusing the contract, or getting it cancelled.
And the company told me that there was PPI found. And it made me, not happy!!
Sara (Debt Camel) says
Not sure who is cancelling what?
Kaz Gregory says
What is the policy with failed IVAs and PPi? I took out an IVA in August 2010 which subsequently failed in July 2013 as I was unable to make the payments. I went on to have a DRO which was completed in Nov 2013. I recently received a cheque from Barclays for mis-sold PPi-they identified and sent this to me, it was not something I claimed. I have not cashed the cheque and have now had a letter from PayPlan to say I have to send them the cheque.
They state that there was a clause in my failure letter to say the supervisor retained the power to deal with any pending PPi claims post closure and will distribute any funds in line with the terms of the variation that happened in 2012.
Is it correct I must send them this cheque-who would they send it too as the debts were dealt with in the DRO?
Thanks
Kaz
Sara (Debt Camel) says
I haven’t come across this situation.
I suggest you reply to Payplan saying that all your IVA debts went into a DRO which started on dd/mm/yy so you no longer owe any money to any of the IVA creditors. See what they reply.
Tea says
Hi Tea here,
I was granted a DRO in 2011 for debts I accrued on credit cards (when I could not keep up payments due to losing my job after a long illness) and all debts were covered, cleared, and six years later my credit score repaired.
In 2016 I was encouraged by a PPI company (Doh!!) to go ahead with an application for PPI as they said it was still possible to claim on one of the cards, (Capitol One) . It was acknowledged that I was owed a refund of about £2000, but that though the debt I owed was covered by the D.R.O, they did not have to pay it and that was the end of the matter. Is this right?
Thankfully the PPI company said I owed them nothing because I had told them right from the start about the D.R.O situation and said they would not charge me the fee normally paid (Phew!). Although I am very grateful for this, and for the D.R.O which gave me freedom from a great deal of worry, I wonder if you could explain how the credit card company can refuse a payout when there has been a D.R.O.
Thank you :)
Sara (Debt Camel) says
Well it is an interesting legal question. Some people think a credit card company is wrong to do this. But if you take the case to the Financial Ombudsman, the ombudsman thinks it is fair that the credit card company can set off your PPI refund against the debt it wrote of in the DRO, so you probably won’t win the complaint.
SO your only option would be to go to court to sue Capital One. I am not aware that anyone has tried this. I think you should talk to a solicitor before doing this!
Samantha Roberts says
Hello Sara
Can I ask a question ( I can’t see where else to ask )
Just reading the above posts on claiming ppl and bankruptcy etc, a good friend of mine still hasn’t got round to trying to claim for ppi.
He was just saying the other day he is going to do it this week whether he had enough time to try and claim himself or use a claims
company. So on looking through all the ppi information for him I somehow came across this article from yourself and remembered that
my friend s company is into liquidation and will be finalised in about August I think he said. It is a Ltd company and he is the only director
I think, so would it be the same situation claiming ppi as a personal individual that has gone bankrupt whereby any successful claim monies
received would go straight to the OR and he would then still owe the claims company their percentage ?
Sara (Debt Camel) says
It’s kind of you but asking for a friend doesn’t tend to work well for this sort of situation. Two options, he could talk to Business Debtline who can ask him questions and give an answer that would be more than the informed guess I could, or he could make life simple by using Resolver https://www.resolver.co.uk/rights-guide/ppi-reclaim who won’t charge him any fees if he wins, as recommended by Martin Lewis. Never use a fee charging Claims Company! In the time he has spent thinking about this, he could already have put a claim in through Resolver!
Samantha Roberts says
Thank you Sara that is very helpful , I will let him know .
One question then, how come Resolver don’t charge any fees , you would think everyone would
be using them?
Kind Regards
Samantha
Sara (Debt Camel) says
Resolver make their money from helping companies improve their complaints handling. See https://www.resolver.co.uk/about.
Fee charging claims companies make a fortune and can hence afford the large and expensive advertisng campaigns eg on Facebook.
Gareth says
Just to comment on my own personal experience. A few years ago I had almost completed my DRO, when my bank tried to force and unsolicited PPI payment on to me (in fact they put it in my account) which would have cancelled the terms of the DRO and left me in an awful position. I had to fight hard to get the bank to take the money back as I had not made a claim at any time. It still frustrates me today that legally, they owed that money through miss-selling, but I could never actually have it.
Kate says
Hi , my dro ended in July and October I have received a letter saying I am owed money from a ppi . They have sent the money to the insolvensy dro department , am I entitled to this money as no longer in the dro ?
Sara (Debt Camel) says
Well the Insolvency Service’s DRO unit certainly isn’t entitled to it.
There is a chance that the DRO unit will decided that your DRO should be cancelled, but I have never heard of this happening because of a PPI refund.
D says
I have made a claim for a refund of interest paid on payday loans from Gain Credit. All the loans were taken out after I was discharged from bankruptcy, apart from one, however I was still subject to a BRU at the time. I have been informed by the FOS that the Insolvency Service have registered an interest in the claim and that the monies due will go to them. Would the Insolvency have a right to keep monies from a redress claim when the loans were taken out after my discharge from bankruptcy because I was still in a BRU at the time? None of the loans were for more than the restrictions allow.
Sara (Debt Camel) says
Did you have an IPA/IPO after discharge?
D says
No. I just had a BRU for an extra 4 years
Sara (Debt Camel) says
Ok then a refund for any loans after the discharge should come to you. I suggest you contact your Official Receivers office, explain your situation and ask for confirmation that the OR doesn’t have an interest in your refund.
D says
Ok. Thank you Sara
Jimbo says
Hi Sara,
I’m now panicking a bit and was hoping you might be able to advise me?
Towards the end of August last year I made a claim for PPI through a claims company (yes, I know now I shouldn’t have done but it was about a week before the cut off point) after a friend told me about the company he used and got a refund.
I read the T&C’s but not as carefully as I should have done and made the claim…
I’d been made bankrupt in 2005 but was discharged about 4 months later, after coming back from work I wasn’t convinced and did a Ctrl+F in the T&C’s and found reference to saying if I was bankrupt so I sent this as an email:
Thank you for your reply however I rechecked the T&C’s and missed on my first read the section about bankruptcy!
I declared bankrupt in 2005 and was discharged later in the year, I did read through the T&C’s but missed it the first time, this time I searched using Ctrl + F and found the section.
I apologise for wasting your time but if this means you’re unable to go ahead with this investigation then please do not proceed further.
This was after receiving this the same day I made the claim: Cancellation
or
Termination
If you wish to cancel (within your 14-day cooling-off period) or terminate (after your 14-day coolingoff period) this service, please let us know by:
(a) Email at – team@reclaimppi.co.uk. (there were two other optional ways to terminate the agreement too).
Jimbo says
There are no fees due for cancellation or termination unless we receive an offer dated before your
termination, when our full fee will apply.
Today I got a settlement offer saying they’ll send £4660.40 to my practitioner as I’m either in an IVA or am bankrupt…
Because I never received a reply when I originally emailed and started to receive updates from past creditors I assumed that my old bankruptcy wasn’t an issue so didn’t chase the cancellation… Have I messed up massively here? I can’t afford to have to pay their 10% + vat! What can I do?
Thanks,
J
Sara (Debt Camel) says
Does this PPI relate to credit taken out before your bankruptcy?
Jimbo says
Hi Sara,
Yes it does :(
I did email the claims company less than two hours after I received email confirmation though to advise that I’d missed the section regarding bankruptcy and asked that if this was a problem then for them to not proceed further – I even put *Important* – Bankruptcy in the subject line of the email too and got what appears to be an automated reply back (which included this in the heading of the reply) minutes later.
I never received any further response until about 2 months later it seems when I got a message telling me that one of my claims looks to be valid. I emailed to confirm I’d received paperwork from the same company and got an automated response but again, nothing more… Everything I’ve ever received has been automated by the look of it.
I haven’t been able to call them as there is no number and it even explains on the site that it’s online only to keep costs down.
I don’t care about the refund, I just don’t want to pay £500+ for nothing when I actually told them about the bankruptcy right at the start.
Thanks,
J
Sara (Debt Camel) says
I think that sounds like a good reason why you shouldn’t have to pay. But in this sort of situation Sometimes the OR pays the fee anyway. I suggest you ask the OR’s office.
Jimbo says
Hi Sara,
Just for the sake of completion…
I called the OR office and spoke to a lovely chap who confirmed that the CMC can send an invoice to them for the charges and they’ll settle the costs although there is a pretty big backlog… About 9 months was the quote.
They gave me a ref. to pass on so they could quote in their invoice and assured me that they’ve had a number of people in the same boat and if the CMC refuses to claim from the OR and try to chase me then (also taking into account my seemingly ignored request to cancel the claim) then the Ombudsman will be “very supportive”…
Thanks again, this is a huuuuuge weight off my mind!
J
Sara (Debt Camel) says
Thanks for the info – glad to hear this isn’t going to be a problem for you.
Karen says
My husband made a PPI claim and it was sent to the insolvency agency. Tax was deducted from the interest, is he able to reclaim the tax as his personal savings allowance and keep it? Or if he reclaims does that go the the insolvency as well?
Sara (Debt Camel) says
The tax would go to the official receiver as well.
Len says
My trustee company has never asked me for any bank statements during any review? Are they likely to?
Sara (Debt Camel) says
it’s common to ask for them. Or you may be asked at the final review when they are trying to close your IVA.
Trevor Wright says
Hi Sara,
I completed a six year IVA in March 2018 . Initially, I was with Debt Free Direct which ironically went into administration in 2017 and latterly with Aperture who took over DFD existing clients . Whilst with DFD they introduced me to Equity in Finance Ltd. to pursue the PPI claims. This Company recovered quite a substantial amount of money in 2014 which obviously went into the IVA. However, no mention has ever been made concerning the statutory 8% interest charge. Whose responsibility would it be to disclose the interest and any redress resulting from such information ? Just recently I have had a very pleasant surprise cheque from Aperture Ltd who secured a successful PPI claim through First Dispute Management . It was duly processed with the interest, less costs, being paid quite promptly.