What happens if a Spouse is made Bankrupt during Divorce Proceedings
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The bankruptcy or threatened bankruptcy of a spouse during divorce
proceedings can be worrying, but there is some protection for the non bankrupt
spouse:
• Property owned in the sole name of a non bankrupt spouse cannot be used
to pay off the bankrupt spouse’s creditors;
• Courts can order the sale of jointly owned property, such as the matrimonial
home. If this happens the non bankrupt spouse will receive their share,
although this may not be enough to buy another home for themselves and any
children;
• If the matrimonial home was jointly owned but has already been transferred
to the non bankrupt spouse, the trustee in bankruptcy can apply to set aside
any transfer made up to five years before the bankruptcy. However, a transfer
will not normally be set aside if it was as a result of a divorce.
Although the non bankrupt spouse will still keep their own property and their
share in any joint property, there may be nothing left for any child maintenance
or spousal maintenance, as demonstrated by a recent high net worth divorce case.
In Young v Young, the couple married in 1995 and separated in 2006 with divorce
proceedings starting a year later. They have two teenaged daughters. Towards the
end of last year, Mr Young was ordered by the court to pay £27,500 per month in
interim child and spousal maintenance. Mrs Young claimed her husband was worth
over £400 million. Mr Young claimed to be in debt.
In September 2009 he was ordered to provide more details about his financial
situation. He was given a suspended sentence for contempt of court and has since
handed over 50 files of information to his wife’s solicitors. Due to his failure
to pay interim maintenance, Mrs Young and their daughters were evicted from
their rented property as she had fallen into rent arrears. They have since found
another property. She has said that she has sold jewellery to help pay legal
costs but owes a substantial amount in legal fees.
HMRC have since started bankruptcy proceedings against Mr Young. If he is made
bankrupt, Mrs Young may end up with no spousal or child maintenance.
If you are concerned about the division of property during divorce or separation
or ancillary relief and child or spousal maintenance issues, please call
Alistair Dobson or Janet Hopkins on 01858 445480 or James Haworth on 0116 212
1080 now or complete one of the on-line forms.
About the Author
Lawson-West specialise in commercial, business and employment law. Our
team of dedicated commercial solicitors can help with buying or selling a
business, business law and disputes, landlord and tenant issues and commercial
property. Our expert employment team can offer practical advice and guidance on
all aspects of employment law including redundancy, compromise agreements and
dismissal procedures. Visit
www.lawson-west.co.uk for more information.
