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By somanyquestions
HI there,

I'm only 1 month into my bankruptcy, and my OR has just sent a letter about my life insurance that i can buy the policy back for £50, would be nice to have a spare £ 50 lying around!! lol to do this ..

so it says if i don't buy it and cese payment the policy may lapse.

or if i don't buy it and just carry on paying the monthly payment then the OR has full entitled to it even after i've been discharged!

I know it sounds such a simple question i may sound silly to someone but don't want to do anything i'm not suppose to.

should i just cancel my policy? and hope nothing happens to me in 11 months,as it's not got any value unless i die or terminally ill.. and if i did can you set up life insurance again after discharge?? :?
By Melissa S
Hi there somanyquestions

I am glad that you have found Beat my debt to be of great help to you, bankruptcy can be daunting but having an expert to help guide you through can really make the difference.

As far as your question regarding your life insurance, I am not 100% clued up on this myself but as far as I am aware if the OR could surrender it and get money to pay your creditors they would. Therefore I am assuming that this is not possible or there is no money available from it.

This is why you have been given the offer to buy it back for £50. If it is possible to raise the money somehow to do this it would be preferable.

Can you save a little from your living expenses budget or borrow from a family member who will agree to wait for repayment until after you are discharged?

This will ensure that at no time can your OR include this as an asset again.

I am sorry I am not more helpful but I am sure someone else here will be able to help further.
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By Hayden
Hello again somanyquestions.

This is an interesting one regarding your life insurance. It is something that I have only just started hearing about so perhaps it is one specific OR or perhaps a relatively new guide line from the Insolvency Service.

Basically if you do not by back your interest in this policy it means that if you die during your bankruptcy (and possibly after you are discharged) any money paid out would first go to the official receiver to pay your outstanding debts and their fees etc. Your dependents would only benefit from any money after left after these payments.

The decision you make about what to do here really depends on your financial situation and what you have the life insurance policy for. If you are a homeowner and it is designed to pay off your mortgage it you die then not having it does open up a risk however slight. However if you are not a home owner then there is probably little to lose from simply letting the policy lapse. You can do this and then start a new one after you are discharged but the premium payments for a new policy might be slightly higher.

Before making any decisions I would get some advice from whomever sold you the policy. First ask if you can have a payment break for 2-3 months. If so this might give you enough time to save the £50 to simply by back the interest in the policy from the OR. If this is not possible then ask about the potential increase in premiums if you cancel now and start a new policy once you are discharged.
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By James Falla
Hello somanyquestions

Hayden is right, this request to buy back the beneficial interest in life insurance policies seems to be new. I had never come across it until a month or so ago. £50 seems the standard amount that the OR has been told to ask for.....

I agree that the first thing you should do is speak to the person who sold you your policy and understand your options. A payment break as suggested by Hayden would seem a good solution if you want to save to pay the £50 to the OR. If such a break is not possible you need to understand the impact of cancelling your policy and starting a new one after you are discharged in terms of any potential increase in monthly payments or changes to policy benefits.

If you are thinking about cancelling you need to weigh up the risk of not having the policy if you were to die during the next 12 months. ie you need to think about why you have got the policy in the first place and the affect it would have if it did not exist and you did die. If you can live with the risk of not having it for the next 12 months and the premiums for a new policy will not go up too much then cancelling might well be a good option if a payment break to help you save for the £50 you need is not possible.
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By Geraldine
Really great to hear that you are finding this site so useful somanyquestions. Let us know the advice you get from the person who sold you the life policy....