Life insurance and debts/ BR

[ohitsonlyme]

Can any one tell me

1/ what happens to the proceeds of an insurance policy owned by a debtor upon his/her demise or bankruptcy then death

2/ can a debtors policy be assigned to a spouse prior to death or bankruptcy then death to avoid any potential problems

 

please dont worry I am not poorly!!!

 

onlyme

[ohitsonlyme]

Can any one tell me

1/ what happens to the proceeds of an insurance policy owned by a debtor upon his/her demise or bankruptcy then death

2/ can a debtors policy be assigned to a spouse prior to death or bankruptcy then death to avoid any potential problems

 

please dont worry I am not poorly!!!

 

onlyme

[debtinfo]

In general a life insurance policy would be come the property of the trustee in the bankruptcy, what happens to it after that depends on the details of the policy.

 

Transfering assets prior to a bankruptcy when you know you are insolvent could be recovered by the trustee and a further restriction pkaced on the bankrupt

[ohitsonlyme]

 

This is not an endowment policy with any value but a simple whole life policy that coughs up if / when I croak it (not imminent)(I hope) It therfore has no current value

 

I am not as yet insolvent just fighting folks off and want to help my other half should I go sooner rather than later as she would not be capable of fighting my cause following my untimely demise so I was considering transferring it to her ownership rather than mine especially as she pays the premiums

 

onlyme

[debtinfo]

regardless of if it has a cash in value or not, it is still an asset as per the bankruptcy rules.

 

there are 2 tests for insolvency, one is if you have mre going out each month than comeing in, so for instance if you had no use of credit could you pay all your bills , food etc plus all of your legaly required payments to creditors, if not then you are insolvent.

 

the other test, is assets based, do you have more debts than you have assets, if so then you are insolvent.

 

if either of the above applies then you are insolvent and disposals of assets would be looked at if you subsequently went bankrupt

[BRIGADIER2JCS]

I was of the impression that

a whole life policy was not

subject to the BR rules?

[debtinfo]

thank goodness the veil has been lifted now then, hey

[toddle2u]

The OR had no interest in my whole life policy which was for a substantial amount.

[BRIGADIER2JCS]

Nor should they have

it is not a tangible amount

until the clogs are popped:madgrin:

[debtinfo]

The policy like all other assets will vest in the bankruptcy, The trustee then has to decide what to do with it, it has been common practice to sell the interest in it back to bankrupt for £50 in recent years, other options are to just let it expire (ie the bankrupt ceases payment).

 

In your case toddle, did you declare the details in your SOA, did you buy the interest back from the OR, is the policy assigned to anyone else, for instance a mortgage company, are you still making payments

[debtinfo]

For info

 

31.5.40 Life assurance policies - bankruptcy

Modern life policies come in a variety of forms ranging from whole life or term policies (where the obligation on the insurer is to pay on death or death within a specified time) through endowment policies (where the obligation is to pay on death or survival for a specified time) to annuities and policies linked to investments in property. They are valuable items of property which can be used as security, sold or otherwise disposed of.

 

31.5.44 Realising life assurance with no surrender value (amended November 2007)

Where the policy does not have a surrender value, the official receiver should consider allowing the debtor to purchase the trustee's interest in the policy. The Insolvency Service has adopted a standard fee of £50 to cover the administrative costs of any assignment of the policy. The standard letter [LTBPOL] should be sent to the bankrupt which outlines the possible action he/she may take in respect of such a policy. It should be noted that if the policy is kept in force by the bankrupt (for example, by continuation of payment of premiums) and the bankrupt does not effect an assigment then any payment due from the policy will be an asset in the bankruptcy estate. The standard letter advises the bankrupt of this circumstance.

In any case where the official receiver has been unable to surrender or dispose of a policy prior to the condition for payment on the policy being fulfilled (including where the policy pays out on the disablement of the bankrupt) the official receiver as trustee will be entitled to receive the proceeds as and when they become payable, whether before or after discharge Re Cork v Rawlins [2001] 3 WLR 300.

 

FURTHER READING

 

http://www.insolvencydirect.bis.gov.uk/freedomofinformation/technical/TechnicalManual/Ch25-36/Chapter31/part5/part4/part_4.htm

[toddle2u]

Yes it was declared and no I didn't have to buy the interest back. It is not assigned to anyone and I am still paying towards. The only think I had to buy back was my pension policy for £50

Edited October 6, 2011 by toddle2u

[debtinfo]

I think you may be confused, Most pensions are exempt from bankruptcy under the Welfare Reform Act and so dont need to be bought back, Life Assurance vests and so does and is commonly sold back if it does not have a surrender value for £50 as per the link above

[ohitsonlyme]

This has been very helpful, so back to my original questions I suppose assigning a poLicy with no surrender value to my wife is not such a big deal given that it would only realise £50 in BR

ONLYME

[debtinfo]

i think you will create more problems by trying to dispose of an asset than you would by buying it back from the OR, depending on your age, health etc, another option could be not to buy it back , just drop it and start a new policy after the bankruptcy