Official Receiver Set to Secure PPI Compensation: What does this mean for creditors?

We understand that the Official Receiver has submitted tens of thousands of complaints on behalf of bankrupt’s estates to secure compensation for Payment Protection Insurance (PPI) mis-selling in advance of the deadline on 29 August 2019. Complaints by the Receiver have meant that banks (including Lloyds Bank) have set aside billions of pounds to repay PPI customers. This means that creditors will expect to receive funds, with the biggest recipient set to be HMRC. The average payout for PPI is around £2,000 and although in bankruptcy cases, HMRC is treated the same way as any other creditor, the Revenue as a whole is owed significant money by bankrupt’s estates.

Who is the Official Receiver?

The Official Receiver (OR) is a civil servant working for the Insolvency Service. When you are declared bankrupt the OR takes control of all of your assets and you have a duty to co-operate with them. The Official Receiver acts as a trustee of the bankrupt’s estate.

To search for the Official Receiver or an office, you can use the Insolvency Service Search.

What does the Official Receiver do?

After you are made bankrupt, your case will be allocated to an Official Receiver who will take over your financial affairs and handle all aspects of your bankruptcy including:

  • Investigating your conduct, affairs and the reasons for insolvency;
  • carrying out an affordability assessment;
  • liaising with your creditors;
  • taking control of your property; and
  • acting as a trustee of your bankruptcy in order to distribute your property and money between your creditors.

You must cooperate with the Official Receiver at all times to the best of your abilities, providing all of the information they request in relation to your property and financial situation.

What is PPI?

According to the FCA, PPI was designed to cover repayments in certain circumstances where you could not make them yourself. These include if you were made redundant or could not work due to an accident, illness, disability or death. As many as 64 million PPI policies have been sold in the UK, mostly between 1990 and 2010, some as far back as the 1970s.

The FCA found that PPI was often mis-sold. More than £33bn has already been paid back to people who complained about the sale of PPI.

What happens at the interview with the Official Receiver? Will they know about my PPI claim?

The interview with the OR takes place within 10 working days of the bankruptcy order being made. The interview with the OR is ordinarily conducted by telephone. The OR will go through your answers to the questionnaire, query the circumstances that have led to your bankruptcy and answer your questions about the bankruptcy process.

Therefore, it is likely that the OR will be aware of any potential PPI claim. If not, you should seek specialist legal advice from expert bankruptcy solicitors.

Why is HMRC Expected to Receive a Large Payout?

HMRC is predicted to gain millions of pounds in compensation due to now bankrupt individuals being mis-sold PPI. It is anticipated that HMRC is likely to be a major beneficiary due to a flood of PII complaints submitted by the Official Receiver.

If a victim of mis-selling then goes bankrupt the Official Receiver, who is tasked with recovering money to pay off a bankrupt’s debt, can claim any compensation due to them and then distribute this to the relevant creditors.  

Banks were hit with thousands of PPI mis-selling complaints ahead of the deadline which is thought to include large numbers of bankrupts who have unpaid taxes, therefore, it is expected HMRC with benefit from the tens of thousands of complaints.

One industry source reportedly shared they have had: “a notable, reasonably large number of complaints from the Official Receiver.”

How much is PPI costing the banks?

Royal Bank of Scotland and Clydesdale Banking Group said, last week, that PPI claims could cost £900million and £450million respectively; Lloyds and Barclays are likely set to pay out more, with Lloyds intimating that it would have to pay up to £1.8 billion and Barclays said it could be hit with additional pay-outs as high as £1.6 billion.

All four banks however shared that paying off the Official Receiver would account for a large chunk of the money, which will leave the banks in total having spent more than £50 billion dealing with the major fallout from the PPI scandal.

How many complaints were sent from the Official Receiver?

Although none of the banks would confirm how many complaints were sent in from the Receiver, figures released from the Insolvency Service show that there were 507,682 bankruptcies between 2000 and 2010, which is when the mis-selling disaster mostly took place.

A spokesman for the Official Receiver said:

We have submitted claims on behalf of bankruptcy estates we are managing to ensure creditors in those estates receive any compensation available. We do not have information as to the number of claims submitted or the likely value.”

The Official Receiver

What happens if you do not co-operate with the Official Receiver?

If you don’t cooperate with the Official Receiver, you may be prosecuted for failing to do so and the Official Receiver can apply to the court for the following:

  • an order for you to attend a public examination;
  • an arrest warrant if you fail to attend a public examination;
  • a bankruptcy restrictions order; or
  • an order for your discharge from bankruptcy to be suspended.

Book an Initial Consultation with Expert Bankruptcy Solicitors and Barristers

We are a specialist City of London law firm made up of Solicitors & Barristers and are based in the legal heart of London in Middle Temple (one of the four prestigious barristers’ Inns of Court) adjacent to the Royal Courts of Justice. We are experts in dealing with matters surrounding bankruptcy including defending bankruptcy petitions; managing bankruptcy applications (including annulments); advising on bankruptcy petitions and offences; and liaising with the Official Receiver.  Whilst we are based in London we provide national coverage across all Courts in England & Wales. We offer free initial telephone advice on bankruptcy matters.

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