The person who is appointed to handle the affairs of a bankrupt person is called a Trustee in Bankruptcy. It is the job of the Trustee to call in the assets of the bankrupt to pay off their debts to their creditors. A key issue if a person is made bankrupt is for the Trustee to establish what assets can properly be taken into account to repay the money owed to the creditors.
In a recent case, Court of Appeal has held that a Trustee cannot force a bankrupt to draw down payment from his pension entitlement if the bankrupt has not elected to do so. So these pension rights will not be counted as part of the bankrupt's income.
The case is interesting because the bankrupt made himself bankrupt and has four pensions that he could have drawdown and taken a lump sum or an income from, but his wife and family supported him and he chose not do to this with his pensions. It is easy to see why the Trustee brought the claim on these facts but the court was not persuaded to accept this argument.
The court pointed out that the Insolvency Act had always excluded pension rights from the estate of a bankrupt. There is an interesting balance to be struck between people being encouraged to provide for themselves in their retirement and the interests of creditors in being paid if something goes wrong.
The court was not prepared to sanction the position whereby the Trustee could effectively force a bankrupt to deal with an asset in such a way that it could become subject to a payments order. After all, a Trustee cannot compel a bankrupt to work so that they receive salary.
Case: Horton v Henry [2016] EWCA Civ 989
Personal insolvency is a difficult area to deal with both legally and emotionally. To discuss this or any other bankruptcy or debt related issue, contact us.