A reader has asked if my recent article on redundancy payments and bankruptcy also applies to inheriting money or assets when you are bankrupt. The answer is “Yes”, but there are a few extra points to consider.
The date of death is the key date
You become entitled to an inheritance as soon as the person has died, so it legally forms one of your assets from this point. There are three cases depending on when the date of death is in relation to your bankrupty :
- the date of death is before you went bankrupt Here your inheritance is an asset that you owned when you went bankrupt and it therefore belongs to the OR.
- the date of death is after bankruptcy but before discharge Here the money you inherit is an “after-acquired asset”. You should to notify the OR about your inheritance and the OR will claim it.
- the date of death is after discharge In this case the money is all yours. The Official Receiver can’t claim any of it and you do not need to notify him about it, even if you have a BRO or a BRU.
It can take a long while to sort out an estate and distribute the money, especially if a house has to be sold. If the money is being divided between you and some other people, you may not know for a year or even two how much it will actually be. But this doesn’t affect the fact that it is date of death that matters. So for example, there is no point in suggesting to your brother who is the executor that he ‘goes slow’ so that you get discharged before he distributes the money.
nb I have simplified what happens legally in this description, concentrating on whether you will eventually get the legacy. If you would like to find out the details, see this Law Society Practice Note which provides explanations about “the thing in action” (that is an actual legal term!) and what the beneficiary, executors and trustee in bankruptcy are obliged to do.
Is there any way to avoid the OR taking my inheritance?
Normally if you inherit money or assets and you would rather it went to someone else, you can use a Deed of Variation to arrange this. But you can’t use this to avoid the OR getting the money. You can only sign the Deed of Variation if you are due to get the money, but your bankruptcy means that effectively the money isn’t yours so you can’t pass it on to anyone else.
If you want to ensure the OR won’t get the money, the only way is to suggest to the person leaving the money that they change their will to leave it to someone else, for example to your children, or a sibling. More complicated possibilities involving trusts could be set up, but these can be expensive. If there is a lot of money involved, the person should to talk to a solicitor who has experience in these matters.
What happens to my IPA?
If the person has died after your discharge, so you do get the inheritance, if you then invest it so it produces income, that income should be declared to the OR. Your IPA may increase because of this extra income. But the IPA won’t be increased just because you now have money in the bank. If you didn’t have an IPA set because your surplus income was too low, this can’t be changed because an IPA can’t applied after your discharge.
Can I cancel my bankruptcy?
Yes if your inheritance is large enough. If you are inheriting a lot of money then your bankruptcy can be annulled. You will have to pay not just the amount of your debts that went into your bankruptcy, but also the costs of the Official Receiver, Trustee etc that have resulted. These costs can be very high. I would suggest you should make sure your own financial future is extremely secure before thinking of doing this, so first sort out your future housing, make sure your pension arrangements are good etc.
How does discharge from bankruptcy work?
A checklist for going bankrupt
Bankruptcy – the big questions
Hayley says
Hi, I have been made bankrupt this week and am wondering where I stand in terms of inheriting money. My parents had like a trust fund set up when I was born which is due to mature in about 2 years. I will be discharged by then so am I right in thinking I would be allowed to keep it? It would be helpful to get a clear answer as my research on line has not been that specific. Thank you. I am finding this website really helpful as I wade my way through the minefield that is bankruptcy.
Sara (Debt Camel) says
Hi Hayley, as a general point, if you receive money or property after you are discharged, the Official Receiver has no interest in it (but if you have an Income Payments Agreement that may be affected.) However trusts are a complicated area – see https://www.insolvencydirect.bis.gov.uk/technicalmanual/Ch25-36/Chapter31/part5/part3/part_3.htm (that link is not for you to wade through and try to work out what applies to you, but to show that this isn’t simple!) You need to inform the OR about the trust so the OR can establish if he has any interest in the trust now. If you are unhappy about the OR’s decision, you may want to take legal advice. NB you may well be fine, I am not saying that there is going to be a problem here, just that you need to inform the OR.
Hayley says
Thanks for your quick reply. That has helped and I will definitely mention it to the OR and see what they advise. Thank you.
Rena says
Regarding your response to Hayley’s question. Would the same apply to a MAP bankruptcy in Scotland?
Sara (Debt Camel) says
Hi Rena, I don’t know enough about Scottish Insolvency to be sure and I don’t want to guess. I am afraid you need to go back to the advisor that helped with MAP bankruptcy.
darren says
hi, I went bancrupt almost 6 years ago, my mam passed away 2 years later and left her house to me and my sister, the house is now up for sale, will I get any money or will the OR take it?
Sara (Debt Camel) says
Hi Darren – assuming that you have been discharged from bankruptcy (and almost everyone will have been!) then you should not have any problems, the money will come to you.
darren says
thanks for the reply, that’s the thing tho……. I’m not sure I have been discharged because I read somewhere that it takes 6 years and it’s only been 5 and a half, it still mentions that I’m bancrupt on experian (a credit score website)
Sara (Debt Camel) says
Check the Insolvency Register here: https://www.gov.uk/search-bankruptcy-insolvency-register. If you are not on it, you have been discharged. It is normal for the bankruptcy marker to stay on your file for 6 years even though almost everyone is discharged after 12 months.
What matters is whether you were discharged on the date your mum died. If you are not sure, contact your Official Receiver and ask for the date you were discharged.
darren says
thanks again for your reply, I feel like I’m being a pest now but I checked that link and I’m not on it (thankfully) I think I got discharged a year after I initially went bankrupt (but I was under the impression that any inheritance or windfall over the next 6 years were to go to the OR (I won a PPI claim 3/4 years ago and got awarded £9000 but the cheque was made payable to the OR ;(
Sara (Debt Camel) says
It is almost certain that you were discharged after a year. Call your Official Receiver’s office to check. It really is worth putting your mind at rest about this.
The PPI position is not the same as an inheritance. For PPI the “right to reclaim PPI” was an asset at the start of your bankruptcy that would have been legally transferred to the Official Receiver. Even after 10 years, any PPI should still go to the OR.
But for an inheritance, the Insolvency Service takes the view that you were only entitled to get any money from your mum’s estate when she died – and if this was after you were discharged then it is all yours :)
casey says
Hi, I am going bankrupt very soon.
I may be inheriting 10000 or a bit less but what happens if they die before I’m discharged of bankruptcy? Thank you in advance for answering
Sara (Debt Camel) says
Hi Casey,
If you go bankrupt and the person then dies within the next 12 months before you are discharged, any money you inherit will be paid to the Official receiver, not to you. This applies even if the person’s estate takes a while to sort out so the money isn’t actually paid out until you are discharged.
Some things you could consider are:
1) do nothing, go bankrupt as planned and accept you won’t get this money if the person dies.
2) postpone going Bankrupt. Make token payments to your creditors instead. Then if you inherit, use the money to make full & final offers to your debts. Of course if the person doesn’t die or you only get a bit of money you may wish you had ignored this and gone ahead with bankruptcy.
3) ask the person who is ill to change their will to leave the money to someone else (your children? a brother or sister?)
john says
could you please advise i was declared bankrupt 5 years ago and was discharged a year later , my question is my grandmother dies last november and left me something in her will
am i still entitled to this or does it go to OR?
is it just matter of course for solicitor to ask for details as they showed up on search?
thankyou
Sara (Debt Camel) says
Hi John, the inheritance should come to you. Yes the solicitor should ask for details – that is doing their job.
John says
Thankyou I just feel annoyed as he can see when the bankruptcy was on his land check but still asks us for confirmation whilst all other parties get some interim payment I’m left feeling like I ain’t getting anything
Sara (Debt Camel) says
Send him a link to the Law Society Practice Note http://www.lawsociety.org.uk/support-services/advice/practice-notes/bankrupt-beneficiaries/ which is clear that “The trustee in bankruptcy has no claim only where the bankrupt has already been discharged at the time of death of the testator or the intestate under whose estate the former bankrupt benefits.”
john says
again thankyou for your time and response but now im even more confused with that statement “The trustee in bankruptcy has no claim only where the bankrupt has already been discharged at the time of death of the testator or the intestate under whose estate the former bankrupt benefits”
any chance of converting for an idiot lol because the only bit has thrown me
Sara (Debt Camel) says
Hi John,
you can translate that as:
“The trustee in bankruptcy has a claim if the death pre dates bankruptcy or predates the discharge.
The trustee in bankruptcy has NO claim if the bankrupt has already been discahrged at the time of the death.”
This is the reason why I don’t quote this sort of thing in the main articles :) But a solicitor should be fine with it.
John says
Thankyou kindly Sara
I shall forward him what he requires , have a good weekend
ms jones says
hi my partner and i will be discharged from our bankrupcy in march this year although my partner has a further 2 years i p a of £60 a month to pay he is 72 and has a state pension and a small occupational mineworkers pension they are trying to pay out lump sums for this pension but have not been notified of this yet i work 16 hhours a week and recieve dla low tate i am 56 if my partner were to except this lump sum offer would they take it all if he has been discharged we are a bit confused and upset by all this
Sara (Debt Camel) says
Hi, if your partner has been discharged when a lump sum is paid from his pension, that shouldn’t be taken. I have written a post about bankruptcy and pensions which may help: https://debtcamel.co.uk/pension-safe-bankrupt/.
It is a confusing and worrying subject, but if he talks to the Official Receiver’s office about this, they should confirm this.
Karen M. says
Help! Our parents passed this past year. There are 7 children to inherit from their trust. One of the 7 children borrowed money from the parents and it was noted by the parents that the unpaid money is to be deducted from that child’s inheritance. Since the death of our last parent that sibling has declared bankruptcy. Is that debt, which was to be deducted from their distribution of the inheritance forgiven now by their declaring bankruptcy?
Sara (Debt Camel) says
hi Karen, I am afraid you are going to have to talk to a solicitor about this problem.
Sam says
Hello, my nan died around a year ago and I believe there will be some inheritance but no idea how much. It could be ten pounds do or twenty thousand. I am in the process of declaring bankruptcy at the moment due to debts of around thirty five thousand. What should I do and is there any way to save the inheritance money?
Sara (Debt Camel) says
There isn’t a way to protect this inheritance if you go bankrupt now.
I think you need to find out how much this is likely to be. £10 shouldn’t change your plans but 20k and you may well have other options to bankruptcy such as making full and final settlement offers to your creditors (see https://debtcamel.co.uk/debt-options/less-common/full-final/). If it’s likely to be a lot then I suggest you talk to StepChange https://www.stepchange.org/ now about whether it would be better to opt for a “temporary” debt solution rather than bankruptcy.
How to find out how much it might be:
If probate has been granted, the Will will have been published (you could find it here https://probatesearch.service.gov.uk/#wills but it would cost £10). If probate hasn’t yet been granted, then the executors are normally prepared to tell someone if they have been left an inheritance. If the inheritance is expressed as a share (eg “5% to each of my grandchildren” rather than “£5,000 to Sam”) the executors may not yet know how much this will be but they may have a rough idea.
Michele says
My grandmother died in 2008, I claimed bankruptcy in 2012. When she passed I was not in financial hardship, but things happen. The inheritance given to me was not issued until 2 months after discharge. Am I safely entitled to any of this money? It’s been sitting in a trust for 4 years, and the trustee I was appointed to never contacted anyone for collection. I’m hoping the date of death (6 months before and after rule)might apply to me.
Sara (Debt Camel) says
Sorry no. Her death was before your bankruptcy started so your inheritance, even though not paid out until after your discharge, was still an asset you “owned” when your bankruptcy began and should therefore be paid to your OR.
Michele says
Just out of curiousity, what if I had been paid out the inheritance 2 months after her death, gone on a trip, spent it all, then 4 years later claim bankruptcy? Would I have been responsible to come up with that money?
Sara (Debt Camel) says
If you had received the money 4 years before you went bankrupt, didn’t have big money problems and blew it on a great holiday that would be fine.
If you had received the money 4 months before you went bankrupt when you must have realised your debts were unmanageable but you still spent the money on a holiday your Official Receiver may be asking questions about whether this was reckless spending and, if it was, if you should get a Bankruptcy Restriction Order.
Clare says
Hi can I ask for some advice I went bankrupt in March 2014 I was paying the £68 a month for 3 years but my parents paid the lump sum off so it was cleared my mother is a bit worried about my inheritance that she has left me when she dies as she wants it obviously to go to me and not to my bankruptcy please could u advise me whether it will be paid out to me thanks so much
Sara (Debt Camel) says
Hi Clare, I assume you have been discharged from bankruptcy? If you have, then any money you inherit is safe.
Ellen says
Hello can you please assist with the following. In February of this year I was declared bankrupt. I am still undischarged and the bankruptcy order was to the value of 30 thousand pounds approx. Today I have been informed I am the sole beneficiary of an estate of considerable more value that I was totally unware of. A family member is the executor of the estate and she does not know that I am undischarged bankrupt. I understand I have a duty by law to explain this but can you help me understand the following. I am fully prepared to repay my debt disclosed at bankruptcy including the official receiver fees and extras before I can have the bankruptcy annulled but my question is, can the OR take the whole estate or just what I owed at time of order being declared in court plus all their additional costs and not the whole estate? I am the only beneficiary named in the will and there are no other worms in the woodwork so to speak to contest the will. Any help would be greatly appreciated. Many thanks
Sara (Debt Camel) says
The OR will not take the whole estate if it is more than is needed to pay your debts, any statutory interest on the debts and the OR’s fees (which can be surprisingly high).
You should talk to the Official Receiver as soon as possible and also the executor. In general the faster things are resolved, the lower the fees will be.
Ellen says
Thankyou Sara for the above information and for replying so quickly. I will ring the OR today and explain the circumstances. Many thanks for your help. Ellen.
Dave C says
Hi my dad died in 2001 his assets where put into a trust for his girlfriend she cannot touch the capitol amount but can live on any interest or monies it occurs, now she can dissolve this trust and share it with me and my sisters if she wanted to but refuses so we will only become beneficiary’s upon her death, or our children if she outlives any of us. Now i went bankrupt in 2008 and have since been discharged , i have been informed that the OR has put a charge on the trust. How can they do this if i am not a beneficiary until she dies. Surely its no different than me receiving an inheritance after my discharge as i am not named as a trustee.
Sara (Debt Camel) says
I can see why this feels unfair but actually the two situations are different in one important respect. Your dad’s partner has a lifetime interest in the assets, but they will definitely come to you at some point, she can’t change this. If you were just named in a Will when you went bankrupt but the person didn’t die until after you were discharged, the Will could be changed at any point up until the death or the assets could be spent so there may be no inheritance.
If you ask your Official Receivers office, they will be able to explain why this charge has been placed. If you remain uncertain you will need to talk to a solicitor.
Jason says
Hi,
If i receive an inheritance or bonus from work or win the lottery after I have been discharged but I am still a monthly sum as part of the 3 year Income payment agreement will I have to let the OR know and will the whole amount go to the OR?
Sara (Debt Camel) says
Inheritance – what matters (as this article explains) is when the person died, not when you actually get the payout. If the person dies after you are discharged, it won’t be touched.
Bonus – this will be claimed by the OR as part of your IPA.
Lottery win – won’t be touched.
PPI payout (you didn’t mention this but it is the other common situation) – any PPI payments go to the OR.
Rachel says
My husband has just been discharged from bankruptcy, but still has two years to run on an IPA. There is a possibility that he will be made redundant soon. Will all of his redundancy money be taken?
Sara (Debt Camel) says
Hi Rachel, this article https://debtcamel.co.uk/or-redundancy-money/ covers redundancy after bankruptcy.
Sharen crane says
My husband have gone bankrupt over a year ago he pays monthly payments he’s payed over 12 months now he should be getting an inheritance in about 6 months time would this affect it will he get the money?? *
Sara (Debt Camel) says
When was the death – before he went bankrupt, after he went bankrupt but before he was discharged (usually after a year) or after he was discharged?
Sharen crane says
The death was 2nd of January this year he is still paying mouthy payments like I say he he’s payed well over 12 mouths now so do he get all of his inheritance ?? Thank you for your help
Sara (Debt Camel) says
So he must have been be discharged from bankruptcy at the time of the death – yes he should get all his inheritance.
Sharen crane says
even if we still make monthly payments ??
Sara (Debt Camel) says
yes :) Read the article above, that explains the details.
David says
Hi,
I declared bankrupt in Aug 2013 and in Sept 2016 I received a letter from the Insolvency Practitioner stating that they have no further interest in our house. However, I also own a 50% share in an overseas property and at present they are still holding on to my claim/share in this property but I haven’t heard from them in 7 months. In September 2016 my mum died and when her estate is distributed I stand to receive a large share, will the IP be able to make a claim on my share of the inheritance?
Thank you
Sara (Debt Camel) says
Your mum’s death was after you were discharged from bankruptcy, so the IP will not have any claim over your inheritance.
David says
Hi,
Thank you so much for your very swift reply. As our overseas property is outside of the rules set for “the family home,” how long can they keep hold of my share of the equity of that property?
Many thanks
Sara (Debt Camel) says
I don’t think there is a limit. One possible option would be for you to use some of your inheritance to buy back your share of this overseas property? I can’t tell if this is a good way forawrd for you, if there is a lot of money involved you should consider getting professional advice on your options.
Polly says
Hi, my dad has just sadly passed away :( I filed for bankruptcy 3 weeks ago, I have been told I should be getting a pay put from death benefits through his pension.. can the or claim this or not? And do we have to let the or know about his car etc if they are being sold to pay for his funeral but I won’t be receiving any of this money myself? Thanks
Sara (Debt Camel) says
Hi Polly, I am sorry to hear about your dad – it’s wretched to have to worry about your own finances at a time like this.
It is likely that the OR can claim any death benefits you receive but this may depend on the wording of the pension. Death benefits are not usually very large – but if you think these might be large in relation to the debts that went into your bankruptcy, I think you need to take some urgent debt advice as there is a possible means for annulling your bankruptcy by entering an IVA.
Selling the car to pay for the funeral will not be a problem, funeral costs are always the first claim on anyone’s property and it is not until these have been paid that anyone can inherit anything. But as a matter of course it is good to let your OR’s office know what is happening.
Robert says
Hello. Not sure if this helps or not. I was declared bankrupt in 2011 and discharged a year later. I had a payment plan for 5 years which ended last year. I too was worried about my inheritance even after the year was up as I had heard that even after the discharge the trustees could still come for an inheritance up until the point where the trustee informs the insolvency agency that they have no further interst in my estate. Might have been wrong advice, but i did feel my inheritance was under threat if my mother passed away, at least for the next few years. So my mum’s solicitor at the time advised ‘letters of wishes’ and put my potential share into a trust. My sister was one trustee and the solicitor the other. Happily my mum is still alive, so i never had to test the theory out, but would this have worked for people in a similar position?
Reading your replies to other people, it looks like i didn’t need to go to the trouble of ‘letters of wishes’? The inheritance would have come to me anyway?
Sara (Debt Camel) says
After you were discharged, any inheritance would have come to you.
sam says
Hi Sara
I had started a bankruptcy order in September of last year but had so much on I didn’t complete it. My nan died in January of this year and has left her house to me and my brother. However there is a clause to the will stating that my uncle has to remain in the property for one year from time of death before we are able to sell it. We don’t want to sell it anyway, but I am desperately trying to scrape together the money for probate which its likely my uncle will contest. I have a huge amount of debt which is out of control and I have been advised by stepchange to go bankrupt provisionally. I’m worried that the family home will effect my bankruptcy but don’t see any other choice I have….any advice please?
Sara (Debt Camel) says
I think you would be very ill advised to rush into bankruptcy now. I would suggest you should opt for a token payment DMP until the inheritance is resolved, see https://debtcamel.co.uk/token-payment-debt/.
When the inheritance is cleared up, you can reconsider your position. But yes, the family home will have an effect.
Nicholas Kay says
Hello
I was declared bankrupt on February 10th 2014 and discharged the following year on the same date. However, on October 9th 2014 my wife suddenly passed away. I informed the OR who passed it onto a law firm to deal with as the trustee. I am now 2.5 years down the line and no further to the house being sold. I have kept up mortgage payments but living alone in this house is once more placing a financial burden on me, and I am unsure as to how much longer I can maintain paying all the bills, let alone feed myself. Can you tell me if there is any timescale to this all being resolved, as the eventual fees from the house sale are increasing every month, in order for me to finally move on with my life?
Sara (Debt Camel) says
Is there any equity in your house? Did your wife own half – did she have a will? Have you asked the trustee what is happening as you want the house sold?
Nicholas Kay says
Yes there’s equity in the house. It was my wife’s house, she had it before she net me and never put my name on the mortgage. I have tried to contact the trustees to find out what is taking so long but thus far have had no response.
Polly says
Hi I recently posted on here as my dad has passed away recently and I am due to receive an inheritance but still undischarged from my bankruptcy, I’m looking at annuling my bankruptcy so that I don’t have enough to pay the large fees to the official receiver, they will be alot less, I have heared that the payment in full can only be made by a third party? Is this correct? Or can I pay the annulment and creditors out of my inheritance? Thanks
Sara (Debt Camel) says
Anulling your bankruptcy involves paying the OR fees and all your debts. If your inheritance is larger than the OR fees and your debts, the surplus will be returned to you and you can annul your bankruptcy. You need to inform the OR about your dad’s death and your likely inheritance if you haven’t already done this.
Polly says
Hi,
So I have told the official receiver that there is an inheritance due, and hace kept in contact with him through out and he told me that the or fees would amount to around £10,000 plus 15% of the assets realised, and pay my creditors meaning I wouldn’t be left with hardly if any at all, ..he has said today that due to the amount that I went bankrupt for being very small compared to others if I annul my bankruptcy then I would have to pay my creditors in full and the or fees which will be around £2,000, considerably lower. However I’m not sure if I can pay this with my inheritance or if it has to be a 3rd party payment? do you know if they will decline my annulment or if they do decline, on what grounds that would be? Hope this makes sense. Thanks
Sara (Debt Camel) says
I think you are going to have to ask your OR to clarify this.
lorraine salisbury says
Can you change a will just before you start bankruptcy in favour of a sibling being the only executor or can you pass your share to your adult child many thanks
Sara (Debt Camel) says
The person whose Will it is can change it whenever they want, even after you have gone bankrupt.
Jake Rueben says
Hi
I was made bankrupt in Oct 2015 and was discharged from it a year later , however my house is still in the hands of the OR until Dec 2018 due to a unofficial 3rd party involved in its ownership, can any monies or new business venture be claimed through this reason ?
Thank you
Sara (Debt Camel) says
No, your house situation doesn’t change anything else. After your discharge any windfalls such as an inheritance are all yours. If you have an IPA, then any extra income may change your IPA. See https://debtcamel.co.uk/discharged-from-bankruptcy/ for more about what happens after discharge.
Louise says
Hi I am thinking of going bankrupt as I cannot afford to keep up debt repayment and do not have enough money left over to do a iva or dmp the thing is I live in my dads house he’s in a care home with dementia,the council disregarded the house as I have lived here 4years and cared for my dad whilst still working full time. My dad has his pension which I pay to the home aprox £310 a wk the council cover the other £240.
I have lasting power of attorney which I understand I will loose once bankrupt.
The issue I have is this :can they take my dads house as he has left to me in his will if he dies before the bankruptcy discharge or after ? Do I need to tell the bankruptcy form I will inherit the house .
I have been advised (by cab ) because I have spent 40,000 in 3 year I have possibly been reckless in my spending and they may put a additional time on my bankruptcy order!
.i have been in hospital for 3 months(2014) for I had a mental break down and my spending escalated when I came out of hospital.
I don’t have much of a idea of where this money went it just has really.
Also I have a house and mortgage with my ex which we purchased in aprox 2010,we split and she has remained in the house and she’s paid the mortgage.how will this be taken into account if I go bankrupt?
Any advise would be appreciated
Sara (Debt Camel) says
“can they take my dads house as he has left it to me in his will if he dies before the bankruptcy discharge or after ?” Befoire discharge – yes. After discharge, no.
“Do I need to tell the bankruptcy form I will inherit the house” no.
“I have a house and mortgage with my ex which we purchased in aprox 2010,we split and she has remained in the house and she’s paid the mortgage.how will this be taken into account if I go bankrupt?” Your share of the house is an asset which will be transfered to the Official Receiver. You should discuss the details of this with CAB. As a rough guide (but the exact details of your case matter a lot in a situation like this) if there is negative equity probably nothing will happen; if there is any equity your ex could purchase your share of the equity from the official Receiver; otherwise her house may be sold. What your share of the equity is may be complicated as she has been paying the mortgage but you can’t safely assume that you don’t have any.
I don’t know if CAB have advised that you should go bankrupt. This appears a very complicated sitution. One alternative would be to settle down for a year and spend sensibly, making low DMP or even token payments to all your debts. Also explain to your ex your situation and suggest that she needs to buy you out or get the house transferred into just her name so that it is safe. If you get any money from her buying you out you could consider using this to make some full and final settlements to your debts – you haven’t said how large these are so this may not help much. Obviously when your dad dies you will then have an asset you could potentially remortgage to repay your debts. You could perhaps discuss some of these options with CAB.
Louise says
Hi thankyou so much the advice is much appreciated.
Finally i gave my car to my ex as she is disabled and needed transport to take our baby out (not the ex i have the house with)
I nevrr paid her any maintenance for two year the car was worth £11,000..i dod this a year ago before i even dreamt id become bancrupt.how do i stand when filling out the forms to apply for bankruptcy do i need to declare it and do i need to tell the ex as would they take the car?
Finally the ex who o have the house with will not offer me anything for the house as we have at least £60,0000 equity..is there anythinh i can do or should i just leave it to the receiver?
Many thanks
Sara (Debt Camel) says
Yes you would have to declare having given away this car a year before. But with a significant amount of equity in one house already and the fact you expect to inherit your dad’s house, it isn’t clear that bankruptcy is a suitable option for you at all. I suggest you need further advice from CAB about your options.
Rob says
I have a question about my fathers death, the date of his death was after my bankruptcy started but it was before my discharge date. My discharge was 3 March 2017 but my father died sadly on 5 Feb 2017. However I was NOT named in his will as a beneficiary but my 2 sisters were. We have since chatted and they have said they would like to pass a share of it onto me by way of a deed of variation if this was possible and would not be lost in or to my previous bankruptcy. Does or would the rule (date of death) affect this in any way as I was not a named beneficiary in the will or expecting to receive any inheritance at all? The estate is currently going into probate and will take some time to sort and finalise as of yet.
Would appreciate your advice on this one.
Sara (Debt Camel) says
So far as I know (and I am not a lawyer) if your sisters used a deed of variation to do this then the money would have to go to the OR. A safe approach would be for them to inherit the money as per your father’s will and then make you a gift of the money. This gift can’t be touched by the OR as you are already discharged.
Rob says
Hi Sara, Thanks for your swift reply.
If my sisters gifted me some money, would it then be taxed as income or unearned income and be liable for 40% tax? Is there a limit on the maximum amount of a gift?
Sara (Debt Camel) says
Gifts are not taxed as income in any way.
The only situation where tax is relevant is if one of your sisters was to die within 6 years of making the gift, in that case it would have to be taken into account for any inheritance tax on her estate. But hopefully they will live a lot longer than that and in any case hardly anyone pays inheritance tax these days…
steven paul eustace says
Yesterday I went into the bank to open a UK account after 18 years abroad. It was the same bank that l used before I went bankrupt in 1998. I had imagined that everything was resolved and there would be no problem. I am about to receive an inheritance from late mother’s estate equivalent to what I had imagined to be my discharged debt. However they presented me with their papers from the OR as a creditor and advised me to inform the OR. I was completely surprised. I have no idea what I should do. Can my inheritance really be seized. I still live abroad, in Spain, but don’t any property or have any real assets. I would welcome your advice please
Sara (Debt Camel) says
When were you discharged from bankruptcy? When did your mother die?
steven paul eustace says
I don’t actually remember being discharged. I thought it was an automatic process. After the bankruptcy in 1999 I moved to Spain and have been there ever since. My mother died December 2016
Sara (Debt Camel) says
It usually is, you would normally have heard about not being discharged… but if you went abroad I suppose something may have gone wrong? If you were discharged before your mother died there shouldn’t be a problem. Contact your official receiver and ask them. And in any case as a matter of common sense, open an account with a different bank!
Ian Buckley says
I am in the middle of a bankruptcy made July 2016. My mother is ill 90 and in a nursing home if I were to go for power of attorney would or could the OR take her money?
Sara (Debt Camel) says
Well hopefully your bankruptcy will be discharged in July 2017, so you are actually close to the end, not in the middle.
Before you are discharged, you cannot have a power of attorney over your mum’s financial affairs, see https://www.insolvencydirect.bis.gov.uk/technicalmanual/Ch25-36/Chapter25/part2/part_2.htm.
After you are discahrged, you can have a PoA and the OR won’t be able to touch your mum’s money.
Stan says
Hi i am concidering bancrupcy but i have a car worth £8000 as i am disabled..would i be able to keep my car ?
Or would i be better to sell and buy one on the mobility..but could they take that car..im so confused
Sara (Debt Camel) says
This car, it belongs to you, i.e. It’s not on finance or bought by someone else? Is it adapted for you to use? Are you sure 8k is an accurate second hand value?
The OR can’t take a motability car as it doesn’t legally belong to you, it’s leased. If you can get a motability car then that is a good way around your situation.
How large are your debts? Are you buying or renting?
Stan says
My debts are £30,000
I dont own a property im in a housing association house paying rent
Yes i think £8,000 is a fair estimate but its not adapted although it could do with some adaptions to help me but if they are going to take it its no point ..
Yes i own it my nan brought it me before she died
I could get a car on mobility with my higher mobility rate but then i guess they will question where my £8000 cars gone..
I have been paying a minamal £7 a month for 10 year to these 6 debts but i feel my situation isnt going to change and i am never going to have the money to pay them back.
Any advice welcome
Sara (Debt Camel) says
What were the original debts, credit cards, loans etc?
Stan says
Yes both tesco loan credit cards and catolouge.
Sara (Debt Camel) says
Those debts are old. For any that were credit cards, loans, catalogues (NB not bank overdrafts) it would be worth asking the creditors to produce the Consumer Credit Act agreement for the debt. You can find template letters and more about this here: https://www.nationaldebtline.org/EW/factsheets/Pages/getting-information/credit-agreement-advice.aspx. If the creditor can’t produce the agreements, the debt is unenforceable in court and you can stop paying it! This may sound scary but National Debtline can talk through all the details with you when you start getting answers to your letters.
As it doesn’t sound as though you are under any immediate pressure from your creditors, I suggest doing this first and seeing what happens. No real need to rush into bankruptcy here.
Morag says
Hi my husband went bankrupt in august 2013. He has now payed back IPA for 3 years the last payment was 7th August 2016 but now he has got an inheritance from his mum who sadly passed away in 1 September 2016. Does he get to keep this money or does the OR get it? he does not know where he stands in this.
Sara (Debt Camel) says
You husband will almost certainly have been discharged in August 2014 – he can check with his OR if he is not sure about this.
In that case, he will have been discharged before his mum died, so all the inheritance will come to him.
Morag says
Does this apply to Scotland’s laws as well
Sara (Debt Camel) says
I would think it probably does, but you can’t rely on my guess for this sort of thing! Sorry, he needs to talk to the Accountant in Bankruptcy’s office, or his Trustee, if one was appointed.
Andrew says
Hi Sara,
Hope you can help…
Unfortunately my mother has just passed away and a month ago I entered into a debt relief order…My brother also a beneficiary of the will has a DMP.
Will either of us be able to claim the inheritance from the sale of the house or will the OR claim it?
Thanks
Sara (Debt Camel) says
I’m sorry to hear about your mum, especially if this was sudden. It can be difficult to focus on money when something like that happens, but you have asked the important questions.
Some more details would let me give much more specific answers. I’ve taken your surname off so this is all anonymous and very rough guesses will be fine.
Are you two the only people inheriting? How large are your debts in the DRO? Any idea how large your brother’s debts in the DMP are? How much is your mum’s house worth after any mortgage / secured loan is repaid, I assume you will be selling it and dividing this?
Andrew says
Hi Sara thx for your swift reply
My brother owes 20,000 My DRO is roughly £7000 My sister also inherits a third share the house is worth 90000 after debts are paid out he currently resides there and we plan to sell and share between the three of us…Mum asked that the 5 grandchildren received 3000 each although it’s not in the will bit we intend to honour her wishes
Sara (Debt Camel) says
OK, so after giving 15k to the grandkids, each of you siblings will inherit roughly 25k.
Your DRO situation – you need to inform the DRO Unit that your mother has died and that you expect to inherit c £25k when the estate is through probate. Unlike bankruptcy, there is no mechanism in a DRO for the OR to claim any money. I expect they will decide to “revoke” (that means cancel) your DRO, but this may be delayed until probate is through as up until that point it won’t be clear exactly what you will inherit. When the DRO is revoked, the debts in it are back to being “normal” debts. When you get the inheritance, you can then use this to settle your debts.
Your brother’s DMP – when he gets his share he too can settle his debts. He could try making full and final settlement offers to some debts – these are more likely to be accepted if he defaulted on them quite a while ago e https://debtcamel.co.uk/debt-options/less-common/full-final/,
Andrew says
Thank you again…one more question I understand that it is my responsibility to contact the OR would I be in trouble if I didn’t do it at this juncture? And just did it when the house was sold…reason I am asking is if my DRO was cancelled now and these debts went back to ” normal debts ” one of the debtors ( HMRC ) were threatening distraint of goods and wouldnt want to go through that all again before we got the inheritance.
Kat says
Hi, I’m new to this but have found this site to be invaluable. Mines a quick question, I have a medical negligence claim that was started in Feb this year. I don’t know if I’ll get compensation, and if I did I don’t really know how much (sorry it’s vague) my question is … if I go bankrupt (which is looking like my only option) and I win my medical negligence case, what happens to the money if I am not discharged from the bankruptcy? I’m worrying sick about this and trying to deal with my situation. However I don’t know how long the medical claim is going to take to be finished. So can’t bury my head in the sand any longer. Any help would be fab! Thank you
Sara (Debt Camel) says
You need to discuss this with your solicitor to see what type of damages you may be awarded. They could be of two kids – special damages are ‘property’ which would be paid to your Official Receiver if you are undischarged or even after your discharge, it doesn’t make a difference. General damages are ‘personal’ and would remain your property.
Also going bankrupt may affect the conduct of your claim and whether the solicitor can still act for you.
If you are likely to receive special damages, it may be sensible to postpone bankruptcy until after the result of the negligence claim. Talk to a debt adviser about your other options in the meantime: https://debtcamel.co.uk/more-information/where-to-get-help/.
Kat says
Thank you so much. It’s such a mine field and I think I’m trying to overload on information. Getting mixed up on things I’ve read etc. I appreciate your help x
deb says
I was made bankrupt I 2013 and was discharged my sister wants to give me a gift of money as she got a windfall I am I allowed to have this or should she give it to my husband instead ?
Sara (Debt Camel) says
Nice sister, the gift can come to you, after discharge it as all yours!
Gerald says
I may be declared bankrupt soon. Can I ask my relative to change their will to leave a legacy to my wife, who will not be being declared bankrupt, without having any impact or claim on the OR or whomever else having a claim on the legacy or should I ask for the will change to be made in favour of another individual I trust?
Sara (Debt Camel) says
A legacy to your wife can’t be touched by the OR or any of your creditors. It would be fine – well providing you are getting on well!
Iain says
Hi
I have just been made bankrupt. I understand if my father was to pass before I’m discharged then any estate would go to the OR. If he was to change his will so my sister was to receive the estate (house) then what would happen if my sister then wanted to give me back the half of the house after my discharge. Is there tax implications or anything I should be thinking about. It’s not nice to ask the question however my dad is practical in the just in case scenario. Many thanks
Sara (Debt Camel) says
“If he was to change his will so my sister was to receive the estate (house) then what would happen if my sister then wanted to give me back the half of the house after my discharge. Is there tax implications or anything I should be thinking about. ”
The OR couldn’t touch the money if your father changes his Will and your sister gifts you the money after you are discharged.
There are no taxes on gifts in this country. The only time tax would be relevant is if your sister were to died within 7 years of the gift to you – if that happened the “gift” would be treated as part of her estate and there could be inheritance tax to may. Hopefully this would be very unlikely to happen!
There are some risks in doing this – there is no way to make sure your sister does give you the money, legally it will be hers and she could simply refuse. Or she could be made bankrupt. Or she could get divorced. But you are in a situation where at the moment you KNOW something bad will happen if your father dies. So you may desicide these other risks are much less likely so you are happy with them.
Iain says
Hi and thank you for the quick response and invaluable information. My father understands this now so thanks again and Happy New Year ????
Taylor says
Hello, I was discharged from bankruptcy on 2013, I’m a named beneficiary along with my two sisters in my mams will which was made in 1993.
The information I have been given from the OR is if the will was made before I went BR it’s classed as an asset, if it was made after they review it.
My mam is going to update her will and I have decided not to be in just let my sister’s give me my share, which is
then fraud, or name my daughter’s in the will and leave it for them, that is not Fraud then.
I thought once you went BR that was it but obviously not. Can you advise. Taylor
Sara (Debt Camel) says
That “information” is wrong.
I don’t know if you weren’t very clear with your question or the person you were speaking to / writing to misunderstood it, or if they understood the question but didn’t know the correct answer.
What matters is the date of the death that causes an inheritance. If that is after your discharge, the money is all yours. So as your mum is thankfully still alive and you are discharged, any money she leaves will be all yours and she doesn’t need to change her Will because of this.
It makes no difference at all when the Will was written. Having a clause in a Will leaving money or property to you is not an “asset” that you own so it doesn’t become the property of the Official Receiver when you go bankrupt. It only becomes an asset of yours when the person dies and the OR can’t touch any assets which you get after you are discharged.
Sara (Debt Camel) says
I realise you are now in a difficult position, not knowing who to believe. I suggest you call the Insolvency Service enquiry line – they really are helpful! See https://debtcamel.co.uk/insolvency-service-enquiry-line/.
If they don’t confirm what I have said, please come back here and say.
Kerry says
My nan is in ill health and has been talking about her will, the majority will be split between her children (my mum and my aunties/uncles) and a small amount to each grandchild (?£500)
My mum has said she intends to use some she receives to help out myself and my brother but as an undischarhed bankrupt (july 2018) would this go to the OR or not?
Sara (Debt Camel) says
If your nan lives until after you are discharged, any money you get from the Will or as a gift from your mum goes to you not the OR.
If she dies before you are discharged, any money you inherit from the Will will go to the OR.
If your mum gives you any money that she inherited, what matters is the date of the gift. If that is after you are discharged, it is all yours, before then it should go to the OR.
Kerry says
Thank you! Also as I haven’t told anyone in my family about the bankruptcy, any money that I may get that goes to the OR would family find out? Iike whoever sorts out the will!
Feels horrible talking about it since my nan is alive but poorly and just lost another family member before Christmas
Sara (Debt Camel) says
Who ever is the executor should check for bankruptcy before distributing any money from the Will. So it is quite likely that the rest of your family might find out. It might be better to have a quiet word with your mum now.
Jo says
Hi I was giving a gift of £15k from my dad in 2015 which we used to put down a desposit on a house. I have now received a letter as my dad has gone bankrupt which I wasn’t aware of and now the letter from the insolvent plp saying I need to pay this back? Can you give me some advice please. Do I need to pay this back and how if I can’t afford it?
Christopher Wood says
Hi Sarah
I have been discharged from Bankruptcy now for 8 Months included in the bankruptcy was a debt to a third party I received no inheritance from my fathers will as he wanted his estate to go to my Sister. recently my Sister gave me some of the money she received from his estate by deed of variance
Today I now have the third party show up at my house demanding to be paid even though they were advised by the OR of the bankruptcy were do i stand am I obliged to make a payment to them or is it my decision
What can you advise
Sara (Debt Camel) says
Did your father die before you were discharged? Was the deed of variation before you were discharged?
Christopher Wood says
Yes my father died before we were made bankrupt but the deed of variation was in the last month which is after we were discharged
Sara (Debt Camel) says
I’ll have to do some research on this – it would have been a lot easier if your sister had simply given you the money! Was she aware of your bankruptcy? And was the solicitor who drew up the deed of variation?
Sara (Debt Camel) says
To be clear, no you don’t have to pay this person anything. The debt to him no longer exists after your discharge. However I am worried (I hope unnecessarily) that you should inform the Official Receiver about this.
Christopher Wood says
Sarah
Looking back my Sister said she wanted to do a deed of variance (something to do with tax) but I am not sure she actually went ahead with it
I did speak with the receivers office and told them of the approach from the debtor I also mentioned that we had been given some funds after the bankruptcy was discharged. Their opinion was that the debt had been discharged and there was no way the debtor could come back on it
I am simply worried that she may well start the whole thing again and will try and get a lawyer to do the deed
Sara (Debt Camel) says
“Looking back my Sister said she wanted to do a deed of variance (something to do with tax) but I am not sure she actually went ahead with it” if she just gave youy the money then there is no question at all that it’s yours, the old debt has been discharged and the OR has no interest in the money.
My only concern is if there was a deed of variation – I will find out more about this.
“she may well start the whole thing again and will try and get a lawyer to do the deed” I assume the “she” here is the old creditor, not your sister! Tell them the debt was included in your bankruptcy and no longer exists. If they get a solicitor, the solicitor should understand that!
Tony says
Hi
I was made bankrupt in the early part of 2006. My mother died at the back end of 2006 and left the house to my two brothers and I, but, there was a stipulation in the will, that the house could not be sold while her companion was still living there and that he should be able to stay there rent free for the rest of his life. I was discharged from bankruptcy early in 2007 and my mother’s companion died in May 2017. The house is now being sold. Can the OR still make a claim on it?
Sara (Debt Camel) says
Was the Official Receiver informed of your mother’s death and Will at the time?
Tony says
Not to the best of my knowledge
Simon says
Hi, i would like to make a will for my four children and split it four ways. However, one of the sons who went bankrupt could not deal with it due to illness so the OR froze it. Its been 5 years and he has still has not dealt with it and does not no what to do. Could i leave his 2 children the money and could he benefit from that money some way without the OR having a right to it? For example If i left the share to his children could his parents (my son and his partner) use the money fore a deposit to buy a house and all of them live in it?
Sara (Debt Camel) says
Are you sure your son is not discharged from bankruptcy? That is very unusual after 5 years. If he isn’t, then I think he should talk to a debt adviser about what his options are.
If your son’s bankruptcy has not ended, it doesn’t matter how much money his children or his partner have, he would not be able to get a mortgage. So unless you are leaving enough money to him/his family to buy a house mortgage free, that really isn’t a concern.
I think you should talk to a solicitor about drawing up your will. There are various options you could consider but they will depend on the whole situation and I don’t want to speculate about it.
john davis says
hi in 2007 I was made bankrupt there was a few problems and I was never discharged and I never heard from the O.R. again so I just left things. in 2013 6 years later my mum passed away and she left me £7000 when all the probate was sorted the probate people informed the O.R. that I had been left this money as I was homeless at the time and hey took the lot away from me. I am still angry as I did everything I was asked to do with the O.R. should they have done this to me the probate people
Sara (Debt Camel) says
“I am still angry as I did everything I was asked to do with the O.R. ” It is a great pity you did not resolve the problem of not being discharged back in 2008-9. Clearly the OR did not think you had done everything you were asked, even though you think you did.
That was a long while ago… it would have been much easier to raise any points at the time. You could go to your local Citizens Advice or a Law Centre to ask if you have any practical options now.
Sadie says
Hi.
I want to buy a house worth 700k from my sister through a discretionary mortgage for 400k as the remainder 300k is being given as a gift from her. I’m worried that should my sister become bankrupt for any reason will my house be at jeopardy? If so,
1. How long after a gift is made to me would this be applicable for . Is there a time limit?
2. My sister also has another fully paid house in her name so if she was made bankrupt and her house was also in jeopardy, would I still be effected if her house worth covered her cost. I.e are all assets and gifts siezed regardless of level of debt etc
3. Is there anything I can do now to protect myself? Some legal documentation that can be drawn up to protect me from this scenario should this situation occur?
Sara (Debt Camel) says
I presume you have some reason to think your sister is in deep financial trouble that cannot be resolved with the 400k she will be getting from you for this house.
If she goes bankrupt, this 300k gift from her would be challenged by the Official Receiver. For a transaction of this amount, I would expect the OR to be likely to do this for 5 years from the date of the gift and you should take professional advice on whether it could still be at risk over 5 years.
I’m not going to speculate on (2) as you may not be aware of the full extent of your sister’s problems and the family home is treated rather differently in bankruptcy. But I will say that the bankruptcy costs also have to be covered and in a case such as this they could well be a lot more than £30,000.
If your sister’s problems are minor or temporary, she needs to take urgent action to deal with them. If they are larger, she needs good debt advice urgently.
The best way to protect yourself, and her, is to not go through with this transaction until she has a fully worked out plan to remove the risk of insolvency.
BOB says
Hi there I am completely confused,I declared myself bankrupt on Jan 29 2018,and will be discharged on the 29th of Jan 2019,there are no restrictions whatsoever as I am unable to work and receive PIP and Universal credit.I was employed upto April 2017,but then got dismissed due to my sickness.When I went sick in Oct 2015 I was covered by a work Income protection policy run through Unum and this should have kicked in after 6 months so April 2016 paying 2 thirds of my salary however Unum declined my claim and I took it to the ombudsman but lost,however without even knowing I then found out if I could produce more health information which I did Unum could still pay my claim however they declined again and it has gone to the ombudsman again and the new information I sent the investigator has changed her opinion and said they should pay backdated to April 2016 and also continue paying me until my 70th birthday(I am currently 63 ),Unum disagreed with her decision and it has now gone to the ombudsman for a final decision,this may be decided before the 29th Jan 2019 but could be after,and it still might not go my way,if I do win the case they would have to backdated to April 2016 upto today so would be 31 months at two thirds salary (approx £1100-00 a month ) around £34000-00 I am now worried I have not even won anythi g yet and been battling for over three and a half years,I am disabled my wife has chronic arthritis and we live in one tiny room
Sara (Debt Camel) says
Well I can’t see there is anything to do except continue with your claim and see what the end result is.
Why can’t you rent somewhere bigger? You should be able to get housing benefit to help with the rent? I think you should discuss your benefits situation with Citizens Advice.