Expartner going bankrupt - adjudicator wants part of a future bonus from secured loan

[Jesus Quintana]

Hi!

First post here and looking for some help on what might be simple or complex, regardless I dont know if what the insolvency service is asking for is right. I'll outline...

Ex partner is going bankrupt and the Insolvency Service has contacted me regarding a secured loan. Ex partner and I have still have a secured loan with both names on it. I've been paying the entire loan for the last 3 years as she said she could not afford it and will continue paying in full until completion.

The reason both names are still on the loan is because it was a secured loan that has a bonus attached to it. The bonus is that, if you hit the terms and conditions, a proportion of the interest will be given back on the 10th anniversary.

The Insolvency Service has responded to all the info I provided and requested that a proportion of the bonus is to be paid to them. I can either agree a smaller sum now or pay the proportion at the end of 2017 (10th anniversary when the bonus is applied)

My question really is:

• This bonus relies on terms and conditions being met (if I miss 3 payments, make an early payment or change anything on the loan - the bonus will be void) and its only available at the end of 2017 if the T&C's are met - how can the adjudicator request early payment or payment from a date in the future for a bonus?
• On the basis that my expartner post bankruptcy will no longer have liability for the loan and I have 100% liability, how can they require that the bonus I'm in control of (have to ensure payments are made etc) gets partly paid to her bankruptcy estate?

I cannot see how they can do it - I mean, what if I want to make early payments and give up the bonus or I get into financial difficulty?

Thanks in advance with your help and guidance on how to respond to the Insolvency Service

[Kati]

Re: Expartner going bankrupt - adjudicator wants part of a future bonus from secured

tagging [MENTION=87380]Diana M[/MENTION] [MENTION=7765]Joanna C[/MENTION] xx

[Openlaw15]

Re: Expartner going bankrupt - adjudicator wants part of a future bonus from secured

Hi!

First post here and looking for some help on what might be simple or complex, regardless I dont know if what the insolvency service is asking for is right. I'll outline...

Ex partner is going bankrupt and the Insolvency Service has contacted me regarding a secured loan. Ex partner and I have still have a secured loan with both names on it. I've been paying the entire loan for the last 3 years as she said she could not afford it and will continue paying in full until completion.

The reason both names are still on the loan is because it was a secured loan that has a bonus attached to it. The bonus is that, if you hit the terms and conditions, a proportion of the interest will be given back on the 10th anniversary.

The Insolvency Service has responded to all the info I provided and requested that a proportion of the bonus is to be paid to them. I can either agree a smaller sum now or pay the proportion at the end of 2017 (10th anniversary when the bonus is applied)

My question really is:

• This bonus relies on terms and conditions being met (if I miss 3 payments, make an early payment or change anything on the loan - the bonus will be void) and its only available at the end of 2017 if the T&C's are met - how can the adjudicator request early payment or payment from a date in the future for a bonus?
• On the basis that my expartner post bankruptcy will no longer have liability for the loan and I have 100% liability, how can they require that the bonus I'm in control of (have to ensure payments are made etc) gets partly paid to her bankruptcy estate?

I cannot see how they can do it - I mean, what if I want to make early payments and give up the bonus or I get into financial difficulty?

Thanks in advance with your help and guidance on how to respond to the Insolvency Service

Only the law in Scotland permits a claim into the future. In England and Wales, Insolvency law is current assets/ and or other property acquired during the bankruptcy period: Insolvency Act 1986. The bankruptcy person usually a receiver, is entitled to everything your ex 'currently' has prior to and during the bankruptcy. As this is not a guaranteed bonus currently, the bankruptcy person cannot claim for a future interests as this the acquisition (receive) will be post bankruptcy, unless of course it's Scotland law, as stated. Unless you see a law, with Scotland the exception, it's not within Insolvency law. Tell them you want to see the law for this apparent right.

[Jesus Quintana]

Re: Expartner going bankrupt - adjudicator wants part of a future bonus from secured

Thanks so much for the clear reply, to confirm this is certainly UK and not Scotland. I know the ex started conversations with the Official Receiver early July 16 and had to change bank accounts already so unless they will not process the formal side until late December 16 then your point is really valid.

Is it often that they get things like this wrong? It feels like quite a silly mistake to have made?

Thanks again

[Crazy council]

Re: Expartner going bankrupt - adjudicator wants part of a future bonus from secured

Hi [MENTION=48934]Debt Camel[/MENTION] posted this the other day, and it may be relevet

http://www.legalbeagles.info/forums/...389#post674389

The argument in the case is about pensions, but, the legal argument seems to be can a trustee claim stuff thats not drawn down during the bankruptcy, thats why i thought it may be relevant, am not sure if it has any relevence to you, but i just see the argument is similar

[Debt Camel]

Re: Expartner going bankrupt - adjudicator wants part of a future bonus from secured

I'm not sure this is quite as clear cut as [MENTION=77627]Openlaw15[/MENTION] suggests.

It is possible to argue that the bankrupt currently posses an interest in the future bonus payment, even though it is uncertain if such a payment will be made and there is no way to sell the asset at the moment.

If she already possess this interest, then that is an asset that will have transferred to the Official Receiver on bankruptcy. See https://www.insolvencydirect.bis.gov...m%20Assets.htm

How much of a discount are they offering for you to settle now?

As a side matter, these sorts of secured loan are usually horrendously expensive. If you have any option for remortgaging or otherwise paying it off now, that could well save you a lot of money compared to waiting for the "bonus".

[Jesus Quintana]

Re: Expartner going bankrupt - adjudicator wants part of a future bonus from secured

Thanks for the additional responses, really helpful. The thing I'm struggling to get my head around is this being a bonus. If it were a pension or investment or asset that had future value then I would have no problem.

With it being a bonus, I could choose to pay it off next month and there would be no bonus so how can they add this to the estate when it may not even exist?

They did not give an indication of the what the reduced figure may be.

Yea, thanks for the hint I've passed the point where the bonus is worth more than the interest I would save by paying it off today. Should have done it years ago but was not in a financial position to do so

[Debt Camel]

Re: Expartner going bankrupt - adjudicator wants part of a future bonus from secured

The thing I'm struggling to get my head around is this being a bonus.

I'm not clear about its legal status either.

Is their equity in the property? How are you proposing to deal with that?

I've passed the point where the bonus is worth more than the interest I would save by paying it off today

unless of course you have to give half the bonus away... :tinysmile_cry_t:

[Openlaw15]

Re: Expartner going bankrupt - adjudicator wants part of a future bonus from secured

I'm not sure this is quite as clear cut as @Openlaw15 suggests.

It is possible to argue that the bankrupt currently posses an interest in the future bonus payment, even though it is uncertain if such a payment will be made and there is no way to sell the asset at the moment.

If she already possess this interest, then that is an asset that will have transferred to the Official Receiver on bankruptcy. See https://www.insolvencydirect.bis.gov...m%20Assets.htm

How much of a discount are they offering for you to settle now?

As a side matter, these sorts of secured loan are usually horrendously expensive. If you have any option for remortgaging or otherwise paying it off now, that could well save you a lot of money compared to waiting for the "bonus".

The bankrupt's estate/ asset must realise property itself: section 310, Insolvency Act 1986... how is property defined? The formal term is 'After-acquired property', which means property acquired during, but before the end (discharge) of the bankruptcy. Currently, there is no property but merely a debt. The receiver can only take what the bankrupt currently has/ owns/ rights to, and currently, all's he possesses is a deficit, ie a loan (a debtor). A loan cannot be an asset therefore, so cannot be tantamount to 'property' in the statutory sense. Property is furthermore tangible, ie real such as home, or pension possibly, if it were realised, ie the bankrupt makes an action to realise it. However, some pensions are statutory exempt anyway, such as 'assured' ones.

Currently, there is merely a loan with a possible outcome of a 'bonus.' It is not even probable that the ex in question can guarantee to meet the terms of loan, he may die, the company may go bankrupt itself, so the variables are too uncertain. A loan is merely a debt - a legal obligation to pay x amount based on Y terms and conditions. A bonus is not guaranteed unless it has realised itself as property, in my opinion.

[Debt Camel]

Re: Expartner going bankrupt - adjudicator wants part of a future bonus from secured

After acquired property is not relevant here. It is a question of whether the right to receive the future bonus payment - however much that may be - exists at the time she went bankrupt.

[Openlaw15]

Re: Expartner going bankrupt - adjudicator wants part of a future bonus from secured

After acquired property is not relevant here. It is a question of whether the right to receive the future bonus payment - however much that may be - exists at the time she went bankrupt.

After-acquired property = property acquired during but before BK discharge. So, said term means after the bankruptcy period started any property/ estate obtained by the bankrupt, is what the receiver is entitled to. The period of bankruptcy only lasts a year so any right the receiver has must be realised before the BK discharge. I know Scotland has law for future interests such as mis-sold PPI's. As far as am aware, and I was not too long ago discussing the matter with the Scottish 'Accountant in Bankruptcy' who confirmed that, England's insolvency law is favourable to its insolvents. So unless there is an English law stating that the receiver can claim a future interest for 1) a post bankruptcy asset; 2) the asset has not been realised (ie not realised as property), there simply can be no claim in law, or that law is ultra vires (illegal in the civil sense).

[Jesus Quintana]

Re: Expartner going bankrupt - adjudicator wants part of a future bonus from secured

Currently, there is merely a loan with a possible outcome of a 'bonus.' It is not even probable that the ex in question can guarantee to meet the terms of loan, he may die, the company may go bankrupt itself, so the variables are too uncertain. A loan is merely a debt - a legal obligation to pay x amount based on Y terms and conditions. A bonus is not guaranteed unless it has realised itself as property, in my opinion.

It is a question of whether the right to receive the future bonus payment - however much that may be - exists at the time she went bankrupt.

Both these points are exactly whats on my mind. Openlaw15 is exactly right, today there is a debt and if I jump through a bunch of hoops, in Dec 17 I get some cash back. In the meantime I am able to default on payments, pay the entire loan off, change something to do with the loan etc all of which result in no bonus as per the terms and conditions.

Thanks for all the great feedback, really helping me understand the problem I'm trying to solve.

The exact thing on my mind is:

• How can the Official Receiver request a proportion of something that currently does not exist and may not exist (akin to them adding a credit to the bankruptcy estate on the future guess of a bonus you might get at work next year with no guarantees you will be in that job or you will even get a bonus)

[Openlaw15]

Re: Expartner going bankrupt - adjudicator wants part of a future bonus from secured

Both these points are exactly whats on my mind. Openlaw15 is exactly right, today there is a debt and if I jump through a bunch of hoops, in Dec 17 I get some cash back. In the meantime I am able to default on payments, pay the entire loan off, change something to do with the loan etc all of which result in no bonus as per the terms and conditions.

Thanks for all the great feedback, really helping me understand the problem I'm trying to solve.

The exact thing on my mind is:

• How can the Official Receiver request a proportion of something that currently does not exist and may not exist (akin to them adding a credit to the bankruptcy estate on the future guess of a bonus you might get at work next year with no guarantees you will be in that job or you will even get a bonus)

The official receiver through his underling/ clerk, then the receiver himself, tried to take my uncle's endowment which was obviously linked pay his interest payment mortgage. Everyone, the Insolvency Service, Debt Line.. confirmed this is within the rules. I researched the law and at this point I merely had a degree in law, which is very academic than it is of practical significance, found the Receiver's law and rules. Guess what, they returned the endowment, even though the bank was 'very disappointed' to quote the receiver.

[Jesus Quintana]

Re: Expartner going bankrupt - adjudicator wants part of a future bonus from secured

Point taken I'll respond to them and update here what the result is. Thanks so much for the help.

[Debt Camel]

Re: Expartner going bankrupt - adjudicator wants part of a future bonus from secured

After-acquired property = property acquired during but before BK discharge. So, said term means after the bankruptcy period started any property/ estate obtained by the bankrupt, is what the receiver is entitled to. The period of bankruptcy only lasts a year so any right the receiver has must be realised before the BK discharge.

This is a badly mangled description.

The right to this future bonus (if the right exists, and I have said it is not clear that it does) will NOT be because it is after acquired property, instead it will be because it was property which the bankrupt owned at the point of going bankrupt. In which case it would be Long Term Asset and the relevant extract from the OR's manual is what I have already linked to: https://www.insolvencydirect.bis.gov...m%20Assets.htm

Assets do not have to be realised before discharge. It is misleading to suggest that they do. Take a common situation where someone inherits, with the death occurring before bankruptcy or after bankruptcy but before discharge - the inheritance will still go to the OR even if the estate is not distributed for many years.