by: Andrew John
Financial difficulties and the breakdown of a marriage often run together. It is
very far from unknown for one of the spouses to be facing bankruptcy at the time
of a divorce. So what would be the effect of a bankruptcy order on the financial
settlement and division of the family assets?
On divorce everything owed by the spouses falls into one matrimonial pot. If one
of the spouses is bankrupt his or her assets do not belong to them but to the
trustee in bankruptcy. This is going to have serious implications for the other
party as they are likely to have no claim on these assets as against the
bankrupt’s creditors. The matrimonial pot for division is going to be much
smaller.
Very often the main matrimonial asset will be the family home which is likely to
be jointly owned. Particularly if there are young children the one spouse will
wish to remain living in the home and probably seek an order that it be
transferred to her. The court is able to make a property adjustment order
against the other spouse but cannot make one against that spouses trustee in
bankruptcy. The half share in the property will be owned by the trustee and he
has a duty to sell and realise that share for the benefit of creditors.
A bankrupt spouse will be unable to pay a lump sum or any maintenance for the
children or spouse. He will have no assets to sell to realise money or anything
which the court could order to be sold or transferred. Any income will be taken
by the trustee for the payment of creditors and will not be available to the
court for settlement on the other spouse.
So what can be done? The answer can only be to act quickly if there is the
possibility of your spouse being declared bankrupt. Remember that some
vindictive spouses will deliberately declare themselves bankrupt to frustrate
matrimonial claims. If this seems possible or is threatened make an immediate
application to the court so that financial orders can be made before the
bankruptcy order. It would be possible for the trustee to apply to have the
matrimonial order set aside but this is unlikely unless there are very
substantial debts.
There have been cases where a spouse has deliberately filed for bankruptcy even
though it is possible to show that he is not insolvent. Should this be the case
it may be possible to apply to the court for the bankruptcy to be set aside. It
may also be possible to show that notwithstanding the bankruptcy there are still
funds available for the payment of maintenance.
Any pension owned by the bankrupt is an exception and does not pass to the
trustee in bankruptcy. The court may therefore be able to minimise the effect of
the bankruptcy by making a pensions sharing order transferring the benefit of
the pension to compensate for other items.
Should a lump sum have been awarded in the divorce proceedings or where there
are outstanding court costs or maintenance it will be possible to claim these in
the bankruptcy. You will rank equally with other creditors but unlike them your
spouse will not be released from liability for these amounts even when
discharged from his bankruptcy.
Bankruptcy is now a ready option at times of financial difficulty and the affect
is not as onerous as at one-time. Bankruptcy will have serious implications for
a divorce settlement but with help from an experienced family lawyer it need not
be a bar to a fair and proper settlement.
About The Author
Andrew John is an associate lawyer with Legal-Zone, a group of independent UK
lawyers working online to provide affordable legal advice. Their website
contains free information on most common legal issues and an advice service
where they will advise on legal matters
To find out whether Legal-Zone can help you if you have a legal problem or
question go to >http://www.legal-zone.co.uk
The author invites you to visit:
http://www.legal-zone.co.uk
Article Source: http://www.articlecity.com/articles/legal/article_2544.shtml
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