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Max Lowry
Max Lowry, Advocate
Category: Law
Satisfied Customers: 1457
Experience:  LLB, 10 years post qualification experience
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Hello. My friend was made (English) bankrupt 2 years ago this

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Hello. My friend was made (English) bankrupt 2 years ago this month - he was discharged well within the first year. He is about to end his army career of 22 years and understands that his actual pension is safe. He is due to receive a substantial gratuity on the strength of which he is asking me to lend him a sum of money.
My friend seems unable to understand the diffirence between a paid-for pension and a gratuity which by definition seems to me to be a long service lump sum award. I understand that receipt of such a sum within 3 years of the bankruptcy date, at least 'could' be taken by the OR. If this is the case then my friend seems to be sleepwalking into a minefield. He thinks that arranging for this gratuity to be paid into his wife's bank account will protect him......
I am being asked to make a further private advance on the strength of this gratuity. But, without wishing to interfere in my friend's affairs unduly, I am hesitating. Would the OR even know about this gratuity payment?
I have tried the Insolvency Service for confidential advice but they have been useless, merely telling me to go to the actual office dealing with the bamkruptcy on a case-specific basis when it should have been obvious that I cannot do that because I am, in effect, going behind my friends back primarily to protect my own interests.
I would appreciate your (obviously) non case-specific advice.
Thank you *****
Hi, welcome to the site. My name is ***** ***** I will help you with your question. Could you please tell me, if you know, does the army give these gratuity payments to all its long standing personnel who reach retirement? Would he have disclosed to the OR two years ago that he was going to get this payment - I suppose he may not have even known about this payment when he was bankrupt?
Customer: replied 3 years ago.

From what I can glean from my friend (without appearing doubtful when asked for further advance financial help in anticipation of this gratuity.....) he would have discussed his almost end-of-service retirement position with the OR at the time of his bankruptcy 2 years ago. He had already served 20 of his 22 years so would have known about his entitlement. Yes, I believe a gratuity is paid to every long serving soldier, possible as part of his conditions of signing up for service.

My problem is that there is a certain naivety in him not understanding the difference between a paid-for pension which is definitely outside the scope of bankruptcy and the meaning of the word 'gratuity' to describe a long term service lump sum award in any sphere of employment but particularly from the army. I am sure that most soldiers reaching somewhere like 18/19 years service think of nothing more that 'only another 2/3 years to go...' So, surely he would have raised this with the OR? But just word of mouth and nothing in writing to counter any later demand?

My friend is inclined to brush aside my hinted doubts - raised partly because I dont want to see his great future plans crash around him at the last minute - approx £40,000, but from a selfish point of view, I dont want to lose any more lendings than I have already risked.

He has his monthly salary paid directly into his wife's bank account for convenience and seems to think that because the projected gratuity will be paid into that account too, all will be well because she is not bankrupt.... I have tried to explain that this is tantamount to giving away money that could rightly belong to the OR but my friend merely says, "how will he know?"

Obviously, I cannot go behind my friend's back to obtain definitive advice from the particular OR for fear of alerting him to something he may like to investigate but I am seeking advice as to whether and how effective the Receiver can be after early discharge of a bankrupt. For instance, I understand an OR retains an interest in property (houses) equity for 3 years. What about lottery wins, legacies, windfalls, gratuities and the like? It is the latter that concerns me. .I understand that my friend was not the subject of any payment order at the time of his meeting with the OR.


Thanks for the additional information. That's very helpful.
On the basis of what you have said it would appear that the OR would have probably asked about this lump sum payment and could have therefore "earmarked" it as being a sum which belongs to the bankrip estate, despite discharge. If this is the case, what usual happens is that the OR would have written to the army telling them of his interest in the money and that it should be sent to them when it is ready to be paid or they receive notification that it is about to be paid.
If the OR does not know about the money and your friend never told them about it whilst he was bankrupt then the OR would not be asking for it. The OR would not receive any notification about large payments going into your friends account. The fact however that he is paying money to his wife's account seems to suggest he is worried about something.
Generally, if someone was bankrupt, say 2 years ago and in their job they received a bonus then once you are discharged, unless the OR knows a bonus will be paid and has earmarked it, it can be kept and the person is free to do with it as he pleases. If however he is subject to an income payments order or agreement then he would need to inform the OR the money was or is about to be received- the money would fall into the bankruptcy pot.
From what you have said though it appears more likely than not that the OR knows about such matters involving people from the armed forces and would have earmarked the cash.
Just another thought, it may be that his bankruptcy debts were around £20k and if he receives £40k from the army the OR will only take the £20k plus any costs incurred. The ex-bankrupt would keep the balance. This is however only hypothetical and you are probably unaware of the level of his debt.
Practically speaking, this is really a commercial decision for you. There are real risks and you need to ask yourself whether he has told the OR about the money/whether the OR already knows about it, which it probably does if these payments are commonly made in that profession.
Max Lowry and other Law Specialists are ready to help you
Customer: replied 3 years ago.

Thank you very much for the information given. I should have come to you in the beginning rather than wait 2 weeks for an answer from the Insolvency people which was of no help at all...

I am rating your information as Excellent. Many thanks

Little bit confused about payment but trust the requested £47 has been received via my credit card.

Thank you for the rating. It is very kind of you.
Do let me know which bit you are confused about and I will do my very best to clarify.
Customer: replied 3 years ago.

I thought the case was settled and rated your answers as excellent. Have you now received the fee? Shall I ignore any further requests?

Hiya, this has been dealt with. Please ignore the emails.
Kind regards