Bankruptcy Pensions

When you declare bankruptcy, it becomes your duty to inform the official receiver about all your assets and properties including your pension plans. Does this mean that you’ll lose your pension funds also during bankruptcy towards payment of debts? This article is all about pension funds and their role in bankruptcy estate.
Before we understand at the role of pension funds in bankruptcy, let us take a look at the types of pensions that are available. There are in general four types of pension that you would normally receive,
1. State Pension – This includes any funds that are released by the State Earning Related Pension Scheme (SERPS).
2. Occupational Pension – This is the employer-employee contributed pension scheme which aids in after retirement benefits. Both you and your employer contribute towards these funds.
3. Personal Pension – This is your personal policy that has been taken in alliance with your insurance company. These pension offer benefits during the later part of the life.
4. Group Personal Pension – This is another kind of personal policy that has been taken in association with your employer and a pension provider for favourable terms and rates. In case of bankruptcy, this pension plan is also treated in a similar way to a personal pension plan.
It is always possible that an individual may possess several policies of the same kind or a single policy from multiple types.

What happens when your declare bankruptcy?
When you declare bankruptcy, your accounts and assets are seized by the court and the official receiver takes over the charges of paying off your debts. You are also required to genuinely provide all details of your pension funds as they are also considered potential source of repayment. Part of your pension or the complete amount can be claimed during your bankruptcy depending on when you receive the amount be it in instalments or a lump sum.

Which part of the pension will the trustee be not able to claim?
During your period of bankruptcy, the trustee makes use of your entire pension funds receivable be it in monthly instalments or lump sum. But there is a certain part of the pension policy that he cannot claim which is your State pension fund or any payments from the SERPS. He also cannot claim any part of your occupational pension which can forfeit upon bankruptcy, as some company define this is your pre-employment agreement. The trustee will also not be able to use any part of the protected rights in your pension that is contracted from the SERPS.

What are the pension funds that the trustee can claim?
The official receiver can claim full or part of your pension plan except for State pension policy that you will receive during your bankruptcy period based on your debt amount. In case you receive any lump sum from your pension plans, they are also taken into consideration for the purpose of debt repayment. In cases where the trustee will not be able to claim your pension, he uses it as an addition to your monthly income and can pass an income payments agreement or order where you might have to pay a designated amount every month towards repayment.

Can pension contributions be made even after declaring bankruptcy?
You can always continue to make contributions to your pension either on the same old terms or can make new terms after your bankruptcy. But you might not benefit completely from the pensions and hence contributions towards them might not be beneficial. You can always contact a pension advisor to get more details about pensions after bankruptcy.

Is it possible that the trustee does not claim the pension funds?
If in case you wish to avail pension benefits in full, then you can always discuss with your trustee about the options of not claiming your pension funds. You can arrange for this if your friend or relative is ready to pay the amount equal to that fetched from the pension plan. You might need to talk with all relevant facts and proofs so as to arrange alternative methods legally.

If in case till my bankruptcy discharge, my trustee has not collected my pension, will I be eligible to receive the payment?
All parts of pension that has been claimed by your trustee will be entitled for him to collect them on its maturity or upon you reaching retirement even if the date occurs after your bankruptcy discharge.

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