Ok, I have found a solution. I don’t fully understant how to apply it to my system but I’ve done some testing and it appears to be exactly what I’m looking for.
Post Process Animation Blueprint
It’s mostly used for IK and dangling bones but in the context of collision it can correct positions of bones after the basic animation blueprint does its thing.
Now I can detect collision with interpolation and use post process animation to move the sword back in case of penetration