How Bankruptcy Affects Your Retirement

Ageing and being unemployed are two important life events that many people fear because of several compelling reasons. One can be that they may not have enough money set aside to fend off the yearly increases in the costs of living once these times come. Moreover, they are afraid that these might hinder them from enjoying the luxuries they have been used to for many years. However, making the necessary arrangements and preparing for one’s retirement can appease all doubts.

But what happens if your status changes so dramatically that you go into bankruptcy before you retire? Read on to know how what can happen to your future.

Will it affect your pension?

In the event of insolvency, your trustee can claim a portion or your entire retirement income, whether you are receiving it now or in the future. However, any approved funding scheme presented on or after 29 May 2000 does not classify as your asset. Hence, the money you receive from such a programme will not be claimed by the organisation appointed by the court to represent all your legal and equitable interests. On the contrary, if you have pension schemes from your employer (occupational) or from a personal account, then the fiduciary firm or administrator can get the lump sum that is payable to you.

What happens to your retirement funds if you die before your discharge from bankruptcy?

If you have nominated beneficiaries, then they can claim the money from the pension scheme. Otherwise, the legally assigned governing body will have control over your finances.

Can you do something to stop the trustee from claiming your money?

If a friend or relative is willing to provide a large sum of money on your behalf, then you can have your benefits in the future. However, the administrating body has to agree to give up their interest in your pension. Thus, you will have to discuss this with them.

Those are just some of the most important questions that you may have to consider if bankruptcy is looming before you retire. For further guidance, contact the experts on this website right away!