Can a private pension be included as an asset in bankruptcy?

[Davypops]

I filed for bankruptcy on 08/08/11 and due for discharge on 08/08/12. I have a self-emp. retirement plan maturing in Oct. 2012 (I don't necessarily have to draw on it then), which I took out in 1983. Now the Official Receiver is seeking to extend the discharge for "between 2-15 years" for alleged "misconduct" running up to the bankruptcy. I strongly deny this and will contest in court. Well - would my pension now be siezeable now it matures within the continuing bankruptcy? If so, then I think that is their real motive. Any help please/ Thanks. Dave

[factor-fiction]

I would guess it would count as income rather than an asset

[themas]

1. If your pension matures & you start getting the income from it before you are discharged, then that income is added to whatever other income you have, & you could have to start making payments for 3 years under an Income Payments Agreement (or have the payments increased if you are already in an IPA).

2. There was a recent Court case which decided that the Official Receiver can take a pension pot (i.e. the capital sum) if it has matured before discharge. In other words, if your discharge is delayed beyond Oct. 2012 & you decide not to take your pension then, the OR can take the pot. I'm not clear on all the details. Either you lose the lot or - more likely - you lose the lump sum you could have got plus the income for 3 years.

3. So your suspicions could well be correct. See whether you can get some free advice from an Insolvency Practitioner before your case goes to Court to give you the best chance of rebutting what the OR is claiming.

[Davypops]

Thanks for that themas. I think I saw something about that too. Another point, if I did start to take payments from it, do you think that would then be classed as income - so I could avoid them taking the whole pot? I will get advice anyway. Thanks to factor30 too. It seems unfair that an investment made in 1983 (and not paid into after 1988) is up for grabs 15 years later!

[bednobs]

it probably seems unfair to your creditors that you've gone bankrupt rather than paying them the full amount back too!

[themas]

I've got a bit more information about this now. It appears that what can happen is that you can be made to draw the pension. If you take a lump sum then that is taken by the OR & you have a 3 year IPA during which the pension income is taken (unless you can show it is required for your reasonable domestic needs). If you elect not to take a lump sum (so that you have a larger pension) then it is just the 3 years of pension income which is taken.

The above will apply whether or not you wait until you are made to draw the pension, so there is little benefit for you in taking it voluntarily now. The only advantage I can see is that your 3 year IPA starts earlier so you are clear of the whole matter earlier (this assumes you don't already have an IPA).

In your circumstances you need to make a judgement on the likelihood of the OR being successful in getting your discharge delayed. If he is not successful then you are home free anyway so it might be premature to take the pension voluntarily before you know the outcome.

Helping you make this judgement is where an IPA might be able to help - if you can get free advice or get a relative/friend to pay for it for you. It is also possible that you might be able to be referred for free advice by a local CAB or other debt advice agency (but don't touch any fee charging debt management outfits).

[Davypops]

Thanks themas... very helpful even though not particularly good news! (Sorry to be thick, but what is and IPA?). I got a projection from the Pension people and its a lump sum of £18,600 + £3,440 p.a. OR just £4,590 p.a. I did go to C.A.B yesterday - they said that because it is a pension scheme "approved by HMRC" it cannot be claimed by the trustee. However, if I receive payments from it before discharge these payments can be inc. in an income-payments order. Are you saying that I can be forced to draw the whole lot? (£18,600). Seems harsh. Thanks for your help.

[Buenchico]

This might be relevant:
http://www.bis.gov.uk...tion-pdfs/pension.pdf

Chris

PS: IPA = Income Payment Agreement
http://www.bis.gov.uk...orders-and-agreements

[Davypops]

Thanks Buenchico, very helpful.

[themas]

I'm afraid your CAB adviser & the leaflet Chris linked to are out of date. The Court case which altered the position is a very recent one. It is:
Raithatha (Trustee in Bankruptcy) v Williamson ([2012] EWHC 909 Ch

If you Google that, I'm sure you can find more details, but Yes it does mean that if you are entitled to draw your pension you can be made to do so while you are still bankrupt (hence - possibly - their attempt to get your discharge delayed). That does not necessarily mean you would be made to take the £18600 lump sum. If you do take it you will have to pay it over to the OR, but my understanding of the case is that you have a choice between doing that & taking the larger pension and no lump sum. You would need to confirm that with the OR but don't automatically assume what he/she tells you is correct - query it if you are not happy with their answer.

You obviously don't have an IPA at the moment, or you would know what it is! However, if you are made to take your pension your income will increase (unless your other sources of income reduce at the same time or earlier by a similar amount). Your income & expenditure will then be re-assessed by the OR & if they deem you to have a surplus of £20 per month or more (i.e. your income is at least £20 per month more than their assessment of your expenditure for the reasonable domestic needs of yourself & anyone dependent on you) then they will propose you enter into an IPA to pay over to them all the assessed surplus each month for 3 years. If you don't agree to this they can go to Court to get an order (called an IPO) to have the same effect. Again, don't just accept their assessment if you think it is wrong - query it & if necessary take it to a higher level in the OR's office.

In your situation, your pension income will be £1150 pa higher if you do not take the lump sum, so if you are made to draw your pension while bankrupt it is clearly better for you not to take the lump sum as - once the 3 year IPA ends - you will be left with a higher pension for the rest of your life.

[themas]

Another thought. There is a possibility that the Court case concerned will go to the Court of Appeal, so it could be over-turned. Unfortunately, these appeals can take a long time to come through, but if they succeed in getting your discharge deferred delay as long as you can before accepting that you have to draw your pension. If you find out that the case is being appealed it would be entirely reasonable for you to say you will not take the pension until the appeal is decided. Clearly they would make sure you were not discharged in the meantime but - so long as there are no other pressing reasons why you want to be discharged - that need not matter.

[cathfromsaron]

ditto above advice and ditto the creditors perspective too!

[Anngel123]

So, it is OK for you to claim your lovely pension while your creditors may be going under? Nice one!

[themas]

Anngel - there are laws governing bankruptcy. There is nothing to stop any bankrupt paying more to his/her bankruptcy estate than the law req

[themas]

(my answer got posted somehow when it wasn't complete)
....than the law requires, but equally there is nothing in law which requires a bankrupt to pay anything other than the amount stipulated. One of the stated objectives of bankruptcy law is to enable people to become free of their debts and have a fresh start. While this does not free them of the obligation to pay whatever is required by the law it does (to some extent) inform the way in which the requirement to pay is calculated.

Part of the law is that approved pension schemes cannot be touched by the OR & it is only the recent case I've mentioned which has interpreted the law in such a way as to allow the OR to take pension money in some cases.

In this case if - as Davypops suspects - the OR is trying to delay his discharge because of this pension issue there is every reason for him to do whatever he legally can to avoid that occurring.

Incidentally, the first call on the money paid into the bankruptcy estate is always the fees of the OR & the Trustee in Bankruptcy (if one is appointed). These fees can be many £000s so it is pretty unlikely that any money paid in Davypops case would go to the creditors.

[Davypops]

Thank themas for all your trouble. I will definitely keep you informed what happens. Thank you again.

[Davypops]

Just an update... The OR has now proposed a 4 year BRO after I put my case to them. Obviously, it still overlaps the pension date. The court judgement about pensions is going to appeal in Sept-Nov. so it depends on that outcome really. Will keep updated, and thanks.

[Davypops]

Just a final update to themas who has been very helpful. The pension doesn't come into play as even though subject to a BRO I was still discharged on 08/08/12. Being subject to a BRO doesn't extend the bankruptcy. So that was good. Re the case Raithatha v Williamson - his pension availability happened before this discharge date....so that was the difference. Thank you again.