Can I keep a windfall after my bankruptcy is over
- 09 Apr 2022
Most windfalls you received after your bankruptcy has finished will be yours to keep. However, there are some exceptions where you will still have to pay the money to the Official Receiver.
Included in this article:
- Which types of windfall can you keep after your bankruptcy is over?
- Can you draw a lump sum from your pension after bankruptcy?
- Does any windfall still have to be paid to the Official Receiver?
- What if you have an IPA (Income Payment Agreement)
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Which types of windfall can you keep after your bankruptcy is over?
Your bankruptcy will usually last 12 months. Then you are discharged (you are no longer a bankrupt person). You will be allowed to keep most windfalls you receive after the date of your discharge.
The definition of a windfall is wide ranging. However, in generally we are talking about you receiving cash lump sums. Some common reasons for this could be that you get an inheritance, a compensation payment, redundancy or a lottery win.
If the payment was received while you were still bankrupt, 100% of the cash would have to be paid to the Official Receiver (OR). But, as a general rule, if you get money after the date your bankruptcy ends, you can keep it.
There some specific cases where such payments still have to be paid into your bankruptcy. We will cover these later in this article.
Can you draw a lump sum from your pension after bankruptcy?
Your personal or company pension is usually exempt from bankruptcy. The Official Receiver is not allowed to claim any of the cash in your pension fund to pay your debt.
However, if you were to decide to take a cash lump sum from your fund while you remain bankrupt, this would be caught by the windfall rule. As such, the money withdrawn would have to be paid to the OR.
But, after you are discharged it is a different story. Any withdrawals you then take from your pension are yours to keep. They can no longer be claimed by the OR as part of your bankruptcy estate.
After discharge, you are free to take money from your pension and do whatever you like with it.
If you went bankrupt before May 2000 the information above does not apply. Your pension is an asset of your bankruptcy and will still have to be paid to the OR whenever it becomes available (even if this is years after the date you were discharged).
Does any windfall still have to be paid to the Official Receiver after bankruptcy?
Sometimes, a windfall you receive after your bankruptcy has ended will still have to be paid to the OR. This is the case if the reason for the payment happened before or while you were still bankrupt. The money is then known as after acquired property.
The easiest way to think about about this is with an example:
Say a relative passes away while you are bankrupt leaving you an inheritance. But probate takes time and you do not get the cash until after the date of your discharge. You can’t keep this money. It remains an asset of your bankruptcy and will have to be handed over to the OR.
It would be the same if you receive compensation for an accident which happened before or during your bankruptcy. The event which lead to you getting the money happened while you were bankrupt. As such the subsequent payment (whenever you receive it) is still an asset which can be taken by the OR.
Windfalls received after discharge but as a result of things that happened before or during your bankruptcy must still be paid to the official receiver.
What if you have an IPA (Income Payment Agreement)
An income payment agreement (IPA) means you have agreed to make a monthly payment towards your debt. This normally lasts for 3 years. It will therefore remain in place for some time after you are discharged.
If you have still have an IPA after discharged, there is an additional category of windfall which you still have to give to the OR. This is where you receive a bonus payment at work.
While you are still paying an IPA, you have to inform the OR if you have any increase to your income. Bonus payments are included in this and so must be reported.
Ordinarily, if you were already discharged without an IPA, you would then be able to keep any bonus you subsequently earn. However, while your IPA remains in place, the OR can take 100% of this cash.
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I have received notification from Barclaycard that they over charged me and there is a refund of just under £800 owed to me. However, they have stated that I will not get this money and will send it direct to the Official Receiver. I was under the impression that although I did have an
IPA which has finished years ago all unsecured debt is written off. Please can you advise me on this matter.
Many thanks
Hi Alan
If your Barclaycard debt was included in your original bankruptcy, then any refunds or windfalls associated with this account (even when paid many years after the event) are still assets of your bankruptcy. As such they still have to be paid to the official receiver.
As highlighted in the article above, this is because the reason for the refund happened before or during the time you were bankrupt. There is no time limit to this rule.
You would only be able to keep the refund if you took out the Barclaycard agreement after you were discharged and therefore the reason for the refund happened after your bankruptcy.