Limited company bankruptcy and private pensions

danabrey

Hey, hoping to get some advice on behalf of a family member.

Their spouse runs a limited company which is under threat of going under in a few months due to business debts. He is due to start receiving a private pension in 18 months' time, and is worried that bankruptcy will affect this pension.

Does he need to be worried about this? Any advice is truly appreciated - I have suggested they go to Citizens Advice, etc. and get guidance.

Minkym00

Sorry can you be a bit clearer.


Companies are liquidated, people are bankrupted.


So are you taking about a company liquidation, personal bankruptcy or both (i.e. will the spouse have to declare bankruptcy due to owing money to the company or via personally guaranteed loans?)

Pennywise

The limited company is a different legal entity, so unless the person has given personal guarantees for the company's debts or has acted fraudulently or negligently, then they won't have to pick up the company's debts.

On the contrary, if they've given personal guarantees for a company loan/overdraft, or a premises lease, or to any other supplier etc., then the bank/landlord/supplier is highly likely to go after them for the debt.

danabrey

Sorry I wasn't clear, I don't know much about all of this!

A lot of the debt is business debt. There are also credit cards and a personal loan that will probably mean that the spouse has to go personally bankrupt too.

My main concern is knowing if he is risking the pension being at risk by putting off the inevitable. i.e. if he went bankrupt after the pension is released, will he suffer more?

Minkym00

An income from a private pension can be assessed in terms of an Income Payments Arrangement so that needs to be considered.


The OR can't make him release any funds from his pension pot. But if he does draw down any money from it then the OR can claim it depending on:


- If he draws a sum down before going BR then the OR can claim it as an asset in bankruptcy.
- If he draws a sum down after going BR then the OR can claim it on a sliding scale, depending on how long after the bankruptcy order it is.


He needs specific advice.

danabrey

Thanks so much, that helps explain things a lot. I've passed that on and reiterated that getting proper advice on this is the only way to know what the best way is to approach it.