Divorce and Bankruptcy

A complicating factor on divorce, if you are a client faced with bankruptcy or with a spouse who is subject to a bankruptcy petition, it is vital to know where you stand. Once a bankruptcy order has been made, the bankrupt’s assets vest in a ‘trustee in bankruptcy’ who will take possession of the bankrupt’s assets in order to pay creditors. This will often include the bankrupt’s interest in the family home. Unless the circumstances of the case are exceptional an order for the sale of the family home is almost inevitable, if the other spouse is not in a position to buy out the bankrupt’s share. Proper advice from practitioners like us, who are experienced in dealing with divorce and bankruptcy is vital.

Clients also need to be aware that the bankruptcy procedure can be used as a fraudulent means to defeat a spouse’s claims on divorce, and a spouse may be able to apply to the court to annul the bankruptcy order or to ask the court to consider the bankruptcy within the financial remedy proceedings on divorce. The family court can also make maintenance orders against a bankrupt and those orders, and any maintenance arrears which have accrued, survive the bankruptcy, meaning that the they can be enforced at a later stage if monies become available to meet the orders.

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