Part 2 – NEW PERSONAL INSOLVENCY LEGISLATION.
Gordon Judge Solicitors has arranged for the removal of judgment mortgages from the titles of a number of properties held by trustees of pension funds where the judgments were obtained against the trustees or beneficiaries in their personal capacities rather than in respect of the pension fund including one case involving a declaration of bankruptcy.
We have separately outlined the treatment by the courts of pension assets in a number of recent cases in our note IS A PENSION FUND AVAILABLE TO CREDITORS? Part 1 – CASE LAW.
Debt Settlement Arrangements and Personal Insolvency Arrangements
The Personal Insolvency Act 2012 introduced new court approved debt settlement arrangements (“DSAs”) and personal insolvency arrangements (“PIAs”) to allow people court protection to restructure their debts without declaring bankruptcy. However, pensions may also go into the melting pot in such arrangements in certain circumstances. Pension funds may be made available to creditors under DSAs or PIAs where the debtor has an interest in a pension arrangement which would, if he or she performed an act or exercised an option, result in the debtor receiving an income or any other sum from that pension arrangement. This will be the case where the act could have been performed or the option could have been exercised on or before the date of the court application for a protective certificate under the DSA or PIA. It will also apply where the act could have been performed or the option could have been exercised:
- Within 6 years and 6 months of the date of making the application for a protective certificate in relation to a DSA; or
- Within 7 years and 6 months of the date of making the application for a protective certificate in relation to a PIA.
DSAs deal with agreed settlements of unsecured debt, with no limit, normally over 5 years. PIAs deal with agreed settlements of secured debt up to €3million (which may be increased) and unsecured debt, with no limit, normally over 6 years.
The Personal Insolvency Act 2012 also introduced new sections into the Bankruptcy Act 1988, dealing specifically with what may happen to pension assets in bankruptcy. It should be emphasised that these only apply in the case of debtors who have actually been declared bankrupt.
The Bankruptcy Act 1988 now includes (in a new Section 44A) specific protection for assets in a retirement benefits scheme or pension trust which, it says, shall not vest in the Official Assignee in Bankruptcy for the benefit of the creditors of the bankrupt. However, this will not apply where the beneficiary who has been declared bankrupt could have exercised an option or performed an act that would have given the beneficiary a right to receive income or capital from the fund in a personal capacity, where such option could be exercised or act could be performed:
- At the date of being adjudicated bankrupt;
- At any time before the date of adjudication; or
- Within 5 years of the date of adjudication.
For anyone who still has assets in a pension fund and is facing the possibility of entering into any kind of insolvency arrangement, getting good advice that assesses your personal circumstances is essential. The age of the beneficiary at the date of adjudication for bankruptcy and the rules governing retirement age in the trust deed governing the scheme are matters to be considered as part of any bankruptcy or insolvency process where there may be pension assets that could be excluded from the arrangement.
For further or more detailed advice on pensions and trusts or other issues outlined in this note, please do not hesitate to contact either Gordon Judge () or Páraic McKeogh ().