OR wants half my endowment !!

mellersh

As some of you know my husband was made bankrupt by HMRC last dec. He hasnt head anything since April when car was taken back so thought all might be going ok . The bankrupcy wasnt anything to do with me but i recieved a letter yesterday from the OR saying he wants me to surrender my endowment policy and give him half or buy him out. The house and endowment have always been in my name (16yrs) but he says because the payent came from a joint account he has a beneficial interest .I had to send him proof some time ago that i could pay the mortgage ect on my own which i did.
Any advice please as he wants an answere in 14 days .many thanks

Voyager2002

Obviously I think you should fight this.

There seems to be a peculiar sadism that makes these people send letters like this to arrive at the beginning of a bank holiday weekend, knowing that you will have three long days to wait before you can possibly get professional advice. I hope you can defeat that sadism and enjoy your bank holiday regardless.

Come to think of it, there must have been all kinds of payments made from the joint account, so unless there is more evidence than this the OR is just trying it on.

mellersh

also tried to phone OR yesterday and he was on a long weekend break and wont be back till wed .hope he is enjoying himself !!

alastairq

Voyager2002 wrote: »

Obviously I think you should fight this.

There seems to be a peculiar sadism that makes these people send letters like this to arrive at the beginning of a bank holiday weekend, knowing that you will have three long days to wait before you can possibly get professional advice. I hope you can defeat that sadism and enjoy your bank holiday regardless.

Come to think of it, there must have been all kinds of payments made from the joint account, so unless there is more evidence than this the OR is just trying it on.

This is somewhat unhelpful .

The OP's husband has a beneficial interest in the property, and all financial gains from it, regardless of whose name is on the mortgage deeds.

This fact is probably well-known in Divorce circles, for example.

The OR has a legal duty to realise all assets from the BR's estate.

The timing of arrival of the letter has absolutely nothing to do with it.....and seeing as it is a Bank Holiday weekend, with the vast majority of any kind of employee having extra time off, the fact the OR will be absent for a day or two extra is their right!

Those who remain at work are making money from it!

debt_doctor

33.81 Endowment policies
An endowment mortgage is one in which the liability to the mortgagee is intended to be repaid from an endowment policy when it matures. An endowment policy is usually funded by monthly contributions made separately to the mortgage payments. In these cases the official receiver should establish from the insurance company URL="http://www.insolvencydirect.bis.gov.uk/freedomofinformation/technical/TechnicalManual/Ch25-36/Chapter33/part3/Notes%20to%20part%203.htm#1"][COLOR=#0066cc]note 1[/COLOR][/URL:

(a) The name(s) of the policyholder(s);
(b) The surrender value or other realisable value of the policy; and
(c) Details of any charges on the policy.

The official receiver should check whether the policy has been formally charged to ascertain whether any policy value is a free asset for the benefit of the estate. The insurance company should be asked to note the official receiver’s interest where applicable. See paragraph 33.85for how to deal with an endowment policy where the mortgage company is deemed to have an equitable charge.

33.82 Disposal of property and endowment policy
Where the official receiver has to deal with the property’s disposal, the bankrupt’s interest in the endowment policy should, if possible, be disposed of at the same time. The official receiver should endeavour to realise at least the surrender value of the policy. The bankrupt’s overall equity in the property will be the value of his/her beneficial interest in the property plus at least his/her interest in the surrender value of the endowment policy. This is assuming the policy is not charged to the mortgagee or the mortgagee’s debt is discharged by the proceeds of the sale of the property, in which case the bankrupt’s interest in the endowment policy would be a free asset available for the benefit of the estate. It should be remembered that any policy in joint names can only be disposed of with the consent of the other beneficiary of the policy. When calculating the bankrupt’s interest in an endowment policy the official receiver should consider whether it is more appropriate to use the re-saleable value of the uncharged policy (see paragraphs 33.83 and 33.13 or Annex 3, paragraph 9 if the bankruptcy order was made on a petition presented before 1 April 2004).

33.83 Disposal of endowment policy only
If it is not possible to dispose of the property and the endowment policy together, and the policy is in the sole name of the bankrupt or all the policyholders are bankrupt, the official receiver may be able to sell the policy if the surrender value exceeds approximately £1,500. Selling a policy will normally realise a higher value than surrendering it to the insurance company concerned. There are numerous companies who purchase or auction second-hand with-profit endowment policies. Details of these companies can be found on the internet by searching for ‘sale of endowment policies’. Generally the policy should have been running for 5 years or more. These companies will give an instant valuation of the policy and no fee is payable for the valuation.


33.85 Equitable charge - policy not assigned to lender
It is a standard condition in many mortgage agreements that the borrower will take out a life policy in support of the mortgage, but a number of mortgage lenders no longer take a legal charge over the policy as security for the mortgage advance. For an equitable charge to be created there needs to have been agreement between the parties and some consideration (e.g. the mortgage advance) needs to have changed hands. If it is clear from the relevant documents and the surrounding circumstances that the parties intended that the life policy in question be appropriated to the repayment of the mortgage advance, then an equitable charge will have been created over the policy in favour of the lender and the official receiver should regard the policy as a secured asset.
If the policy document is deposited with the lender and/or the lender’s interest is noted with the insurance company, it must be presumed that the parties intended that the proceeds of the policy should be available to repay the mortgage and the lender will have a valid equitable charge on the policy which should be regarded as a secured asset.
Where the policy document is retained by the borrower (i.e. the bankrupt) and confirmation of its existence has not been communicated to the lender, it is doubtful that an equitable charge exists and the official receiver should realise the policy for the benefit of the creditors (free of any charge).

DD

debt_doctor

From the above, I think the OR could only, possibly, have an interest if the policy is unassigned, but even then it suggests "retained by the bankrupt". However, the onus to ESTABLISH a beneficial interest of the bankrupt and the legal costs is down to the IS.

If this were my client I would be contacting Specialist Support for guidance, as it is a complex area. I think you should approach a specialist insolvency solicitor for an opinion.

Personally, I think the IS have a job on their hands, and my first action would be to say "no" and see what happens.

Of course you could try to get an appointment with a debt adviser at your local CAB, who might then contact SSU on your behalf!

DD

fermi

Some info on the main IS site as well.

What if I have an endowment policy that is connected to my mortgage?

What if I have an endowment policy that is connected to my mortgage?

If you hold an endowment policy in connection with your mortgage, the trustee in bankruptcy holds an interest in this policy as well as the property. If the policy is in joint names and only one of the joint policy holders is bankrupt, the trustee usually holds a 50% interest in the policy.

Endowment policies are sometimes charged to the mortgage company to cover the amount outstanding on the mortgage (either at the end of the mortgage period or on the death of the policy holder/one of the joint policy holders). If the trustee in bankruptcy is selling their interest in a property, they will also seek to sell their interest in the connected endowment policy, which will be calculated with reference to the mortgage and property value.

For example, if a solely-owned house is worth £50,000, the mortgage is £51,000 and the endowment is worth £3,000, the trustee's interest will be as follows :

Value of interest in property = £50,000 - £51,000 = Nil
Value of interest in endowment policy = £3000 - £1,000 (being the shortfall on the mortgage) = £2000.

If there is no shortfall on the mortgage, i.e. the house is worth more than the outstanding mortgage, the endowment policy is effectively free from any claim by the mortgage company. In this instance, the trustee's interest will be 100% of the value of the endowment (or 50% where the policy is in joint names).

The trustee usually seeks to sell their interest in an endowment policy to the same person to whom they sell their interest in the connected property.

If the trustee is not selling their interest in a property, and there is an endowment policy charged to the mortgage company, the trustee will just register their interest in the policy with the relevant insurance company. The trustee will then claim their interest when the policy is realised at a later date.

If the endowment policy is not charged to the mortgage company, the trustee is entitled to realise the policy.
NB If the property re-vests after 3 years this does not affect the vesting of the endowment policy.

debtinfo

One thing to say dd though is that you are right that if it assigned then there is no interest in the policy, but that interest does not just disappear it just means that the interest is moved over to the property instead as the assigned endowment creates greater equity in the property.

Though as you say it is for the or to prove the interest in either because they are not in joint names

debt_doctor

debtinfo wrote: »

One thing to say dd though is that you are right that if it assigned then there is no interest in the policy, but that interest does not just disappear it just means that the interest is moved over to the property instead as the assigned endowment creates greater equity in the property.

Though as you say it is for the or to prove the interest in either because they are not in joint names

Hi DI,

Yes, I agree with the above.

DD

DVardysShadow

I am no expert in this and am merely going on the info presented thus far.

If there is no shortfall on the mortgage, i.e. the house is worth more than the outstanding mortgage, the endowment policy is effectively free from any claim by the mortgage company. In this instance, the trustee's interest will be 100% of the value of the endowment (or 50% where the policy is in joint names).

It looks to me like the OR is trying to generate grounds for treating the endowment as being in joint names, which plainly is not the case.

However, I am wondering whether looking at it from the point of view of where the money goes to rather than where it comes from is actually to miss what is in the OR's mind? Suppose the money from the joint account was going to a monthly 'fine wines club' subscription. OR would presumably claim 50% of the fine wines in the cellar on the basis that they were funded from joint funds. So in order to make the claim, they need to view this endowment as separate from the house - presumably if OP had a repayment mortgage, then proving own means to fund the mortgage would put an end to their quest?

Maybe there is even a bit of a thin edge of a wedge here, that by separating the endowment from the house they can prove a beneficial interest - which then extends back to the house once the beneficial interest is proved?

mellersh

Thanks to you all.Just to let you know I have had to go to a solicitor to fight this for me it will cost a bit but in the long run hopefully be worth it.He seems very positive and thinks they are trying it on as a last ditch attempt to get some money.