There is a common expression that the CPF funds in your accounts are not actually your money. This is untrue, and a more accurate way to express the status of our CPF funds could be: “Monies in your CPF accounts are yours, though they are protected on your behalf by the CPF Board”.
This protection of our CPF funds (and retirement adequacy) comes in two forms. First are the rules governing the usage of our CPF monies, which prevent us from squandering them, overcommitting to property purchases, or making catastrophic investment losses. Second is the legal status of our CPF monies, which safeguards them from creditors in the event we become bankrupt or pass on.
Here’s what you need to know about what happens to your CPF monies in the event you declare bankruptcy, and what it means for your retirement, housing, medical and other key expenses.
What Happens When You Declare Bankruptcy – In A Nutshell
Essentially, you will need to submit and surrender a list of assets to the Official Assignee, including bank accounts, investment holdings, properties, and valuables, which will be liquidated and distributed to your creditors in accordance with the Bankruptcy Act.
As part of what happens when you file for bankruptcy, you will also need to adhere to a repayment plan and pay a stipulated Target Contribution.
Since legally, your CPF monies do not fall under the list of assets that you own, your CPF funds are protected and out of reach of your creditors.
Usage Of Your CPF Monies As An Undischarged Bankrupt
The usage of your CPF monies is mostly unchanged, subject to prevailing CPF rules, with the exception being the ability to invest your CPF monies under the CPF Investment Scheme (CPFIS).
When you are an undischarged bankrupt, you will not be able to make any new investments under CPFIS.
However, if you have any existing investment holdings in CPFIS, you can continue to hold on to them. You can also continue to use your CPF funds to make premium payments for regular premium insurance plans you initiated prior to declaring bankruptcy.
As for the other uses of your CPF monies, such as paying for education, payment for purchase of a HDB flat and/or subsequent HDB mortgage payments, and medical fees, you will continue to be able to do so under the prevailing rules.
Can You Withdraw Your CPF Monies – And What Happens If You Do So
Even if you are an undischarged bankrupt, you can withdraw money from your CPF when you reach the age of 55, based on the withdrawal rules, as well as receive CPF LIFE/Retirement Sum Scheme payouts each month if you are eligible to.
However, you should know that once these withdrawals are made in cash, they will not be protected from claims by your Official Assignee. Material changes to your assets (such as a large lump sum of cash from a CPF withdrawal) will need to be reported, and will likely go towards paying your creditors.
Declaring of assets to the Official Assignee (and subsequent paying off your creditors) also applies if you are an undischarged bankrupt and are the recipient of a deceased person’s CPF monies via a CPF Nomination.
What Happens To CPF Monies Of Undischarged Bankrupts Who Pass Away
If you pass away while still being an undischarged bankrupt, your CPF monies will be distributed according to your CPF Nomination or, in the absence of a CPF Nomination, Singapore’s intestacy laws.
Your CPF monies are protected from legal liabilities and cannot be used to recover debts you owe. The exception would be CPF monies placed in investments (via CPFIS), which will be part of your estate and transferred to your Official Assignee for distribution to your creditors.
Legal Structure Of CPF Monies Is Invaluable For Safeguarding Our Retirement
As we can see, our CPF monies are well-protected, in the event we fall on hard times and need to declare bankruptcy.
Life as a bankrupt is tough, but at least bankrupts can take some comfort in knowing they have a pool of funds in their CPF that will remain protected while it continues to grow, which they can continue to rely on for medical, housing, education, and eventual payouts in retirement.
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