Life Insurance and bankruptcy are often overlooked. People are allowed to keep their life insurance policies in place, subject to ‘buying the Official Receiver’s interest’ in them for a token amount, usually £50. Appearing below is an extract from the Insolvency Services’ Technical Manual for the purists among you:
What action can the official receiver take if the policy has no value?
”The official receiver should inform the bankrupt of the consequences of continuing to pay premiums into a policy which vests in the trustee (form LTBPOL). Where the policy does not have a surrender value, the official receiver should consider allowing the debtor to purchase the trustee’s interest in the policy. The Insolvency Service has adopted a standard fee of £50 to cover the administrative costs of any assignment of the policy. The standard letter (form LTBPOL) should be sent to the bankrupt which outlines the possible action he/she may take in respect of such a policy. If the policy is kept in force by the bankrupt (for example, by continuation of payment of premiums) and the bankrupt does not effect an assignment, then any payment due from the policy will be an asset in the bankruptcy estate. The standard letter advises the bankrupt of this circumstance”