Hello Karen and welcome to the forum.

I'm sorry to hear about your recent diagnosis.

In a recent thread Kevin explained how pension lump-sums typically are excluded from Trust Deeds:

http://www.trust-deed.co.uk/forum/topic.asp?TOPIC_ID=618

In terms of your Trust Deed is there a way to realistically maintain the payments?

Do you have any significant assets (such as equity in a home) that would be lost if the Trust Deed were to fail and you went bankrupt instead?

Hi,

Thanks for your reply and i am relieved to hear that if i do nee to be pensioned off that i can keep any monies i get.

I have no assets as i went into the trust deed following seperation from my STB ex husband. I do not even own my own car!

I pay ?ú255 per month, which i am managing to maintain at the moment, but if i become unable to pay it due to being to ill to work would i need to go to bankrupcy?
Also, does any benefits i might get be counted as income? Like incapacity or DLA?

Thanks
Karen

Hi Kola23,

All income (and reasonable expenditure) is used to calculate what you can afford to pay towards the debts (in a Trust Deed or bankruptcy).

With no assets it would seem that there may be little to lose from bankruptcy if the Trust Deed payment is no longer manageable and the Trust Deed company are not open to reducing it.

However I think it would be useful if one of our experts can confirm the position towards the pension lump-sum if you were to go bankrupt rather than continue with the Trust Deed.

Will someone be able to let me know where i stand with the bankrupcy and lump sum?

Thanks
Karen

Hi Karen,

I'm sure that Mark, Kevin or Julie will add their thoughts very soon. Sorry that this hasn't been responded to as yet.

Hi Karen

In summary, it is normally exempt, however depending on type etc, the Trustee may seek a contribution.

Chapter and verse:

The protected trust deed will exclude any assets that would not vest in a trustee in bankruptcy. The following types of asset are not conveyed to the trustee under a protected trust deed ÔÇô

ÔÇó Personal and occupational pension plans. See sections 6.18.1-2 of the AccountantÔÇÖs Principle Notes for Guidance of Trustees.

The general position is that where the debtor is in receipt of any form of pension or annuity at the date of sequestration, such payments are classed as income which, as per Section 32(1) of the Act, does not vest in the trustee. It is of course open to the trustee to seek a contribution from such income through an IPA or IPO, as per Sections 32(4A) or 32(2) of the Act, including a one-off contribution from any lump sum payment received by the debtor.

It is arguable that a lump sum payment constitutes acquirenda which would vest in the trustee as per Section 32(6) of the Act but this proposition has not been tested and to seek a contribution rather than attempt to claim the whole sum may be regarded as a ÔÇÿsaferÔÇÖ option.

Occupational pensions

Where a debtor has an entitlement to a pension, including any lump sum element, as a result of his employment, i.e. an occupational pension scheme, even if that pension becomes payable on a relevant date, the pension is specifically exempted from vesting in the trustee under per Section 32(2A) of the Act, as inserted by section 91 of The Pensions Act 1995. The trustee may of course seek an IPA or IPO, as per Sections 32(4A) or 32(2) of the Act.

Mark

Hi Karen

To go back to your earlier question about whether you can be asked to make a contribution from your benefits, the answer is no. However, they can be taken into consideration when a trustee is assessing whether you can afford to make a contribution payment from any other income you are receiving (such as your monthly pension).

It strikes me that it may be useful to clarify the meaning of the official guidance that Mark has laid out for you, as I am aware there is a certain amount of jargon involved.

An IPA (or IPO) is basically an arrangement whereby you agree (or are required to) make a regular contribution from your income. Therefore it means that an occupational pension lump sum is not payable to your trustee but they are entitled to seek a regular contribution from you based on your new income.

This may seem like a point made somewhat "out of the blue" but I think Karen will understand the reason for asking...

Karen - could you confirm where you are living now and how long you have been living there?

Yes, sorry have just read Andrews email.

I now live in Northern Ireland, and have done so for the last year, but my trust deed is scottish.

I really have no intention of not paying my trust deed, but may look to have it reduced to accommodate my reduced income.
My main concern was in case i was offered my pension on ill health grounds and was given a lump sum...

Karen

Hi Karen,

The position regarding one year might be important.

Is it over or under a year since you moved there?

It was one year in April 2010, so technically 1 year and 5 months...

Is this only important if i want to become bankrupt and my trustee won't reduce my payments according to my income? Is this having an effect on my lump sum?

Hi Kola23,

I was thinking about the eventuality of the Trust Deed ending. I don't know whether sequestration (Scottish bankruptcy) would be a possible result. You would normally need to have been "habitually resident" in Scotland at some point during the previous twelve months.

Insolvency law in the rest of the UK is different to that in Scotland (and in fact insolvency works a little differently in Northern Ireland than it does in England/Wales).

As such the information provided thus far might not be relevant to you.

Hopefully one of the experts can add some thoughts soon to what seems to be a pretty technical area.

Of course if a reduced Trust Deed payment can be arranged (and is manageable for you) this all might be irrelevant anyhow.

Hi Kola23

On the basis that your circumstances change to the point that you can no longer make payment of the contribution, then the Trust Deed will have failed in its job.

The Trustee needs then to look at the options. He will try one of 2 things I suspect:

1. He can try to be discharged from the Trust Deed, but not discharge you from the debts. This could potentially open you up to legal pursuit of the debt as the Trust Deed no longer offers protection. IMPORTANT - The guidance states quite clearly 'It would not be appropriate to refuse to discharge a debtor because of a change of circumstances which prevents them from continuing to pay contributions'

2. The Trustee can use the failed Trust Deed to petition for bankruptcy (sequestration). However as you have been out of Scotland for a period in excess of 12 months, there would be an issue with jurisdiction and it would be unlikely that a court would grant an award of bankruptcy on this basis. Also the Trustee also needs to prove that you have been served with the petition which is at best unlikely in Northern Ireland.

My advice would be to sit back and see what transpires. If you need advice on finalising matters in Northern Ireland, please let me know as I have an office there and can get them to advise you on all things Irish (well not all things!)

Mark

Hi Mark,

Thanks for the reply.
I am not making an decisions as yet...
I will continue to pay my trust deed and my only real concern was the lump sum, because obviously if i was to be pensioned off and i had to declare a reduced income, i would need to declare the lump sum, and now have no fear of it being took away!

If i need help thereafter i will be in touch,

Thanks to you all for your help,

Karen