We all have a variety of financial assets: retirement savings, education funds, and deposits. What happens to these assets in an insolvency proceeding, what funds can be protected, and how should you act? guide
When filing for bankruptcy, the attention of people in debt focuses on the fate of tangible assets: the house, the car, and valuables.
In addition to these assets, we all have a whole other set of financial assets that are also affected by the insolvency process.
In this article, we will review what will happen to them in the process and how to proceed in order to protect them.
1. Pension fund
After the mandatory pension arrangement adopted in 2008, we all have pension savings in a pension fund, executive insurance, or provident fund. The pension funds accumulated in savings are accumulated from two sources: reward funds that are set aside for savings, and compensation funds that are deposited into the fund each month, with these two types of funds behaving differently within the framework of the procedure. As long as you have not retired, there is protection for the compensation funds and they are completely protected. The compensation money, however, goes to the creditors.
If insolvency proceedings take place after you have already retired and you receive a monthly pension, it is protected from creditors. However, if you wish to receive some of the funds accumulated in the pension fund instead of as a lump sum, these will be transferred to the fund and creditors. Therefore, pensioners who are in insolvency proceedings need to be well aware of the consequences of choosing to withdraw lump sums from their pension savings.
Another practice that has become popular recently is borrowing from the institutional bodies that manage pension savings. In such loans, the pension fund has the right to be repaid from the accumulated funds when the loan is not repaid. But if such a loan was taken out and the debtor enters insolvency proceedings – the fund does have the right to be repaid from the funds the debtor has saved, but the other creditors will not be able to join in and be repaid from the pension funds as well.
2. Non-pension savings
Non-pension savings are transferred to creditors as part of the procedure. Such savings can include bank deposits, investments in mutual funds or an investment provident fund, and savings in further education funds. If the savings are liquid, they will be repaid immediately, if not, in most cases they will wait until the funds are liquidated and then they will actually be transferred to the creditors.
3. Life insurance
Sometimes, during the insolvency process, the debtor dies and it turns out that he had life insurance for a large amount. In such a case, since the entitlement to receive the funds is only established after the procedure begins and does not exist before it, the life insurance funds will go in full to the heirs.
In conclusion – it is important to understand what we are facing
We all have different financial assets and sometimes there are subtle differences between one financial asset or another. Proper management of these assets will determine whether the funds remain in your hands or are transferred to creditors. Therefore, if you are unable to repay loans on a regular basis, it is recommended that you consult with an attorney specializing in debt relief before making any changes, loans, withdrawals, or transfers of your financial assets.
