Bankruptcy and Divorce

When dealing with your financial divorce settlement, the court has the power to redistribute your assets and income. Conflicts arise when one party becomes bankrupt. In insolvency proceedings, the aim of the trustee in bankruptcy is to deal with the bankrupt’s assets quickly. This may result in serious implications for you, as the spouse of the bankrupt, since your likely goal is to achieve a fair division of the family assets for the benefit of you and any children.

It is important to seek legal advice from a family lawyer when you are considering starting a divorce, and in circumstances when one party is bankrupt. Timing is important. You should aim to agree and file your financial settlement with the court before the bankruptcy petition is filed.

Challenging your spouse’s bankruptcy

Sometimes it becomes clear that your spouse has started bankruptcy proceedings as a means to defeat your financial claim on a divorce. You are entitled to challenge your spouse’s bankruptcy by establishing that they were able to pay their debts at the date of the bankruptcy petition or application.

What happens to the family home?

Even when you have a beneficial interest in the family home, the trustee in bankruptcy can apply to the court to sell the family home.

A trustee in bankruptcy also has the power to set aside a transfer of property and transactions at an undervalue. In order to challenge a transfer of property order, the trustee in bankruptcy will have to show the following:

  • Fraud
  • Mistake
  • Misrepresentation
  • Some broadly similar exceptional circumstance

Should you need any advice or assistance concerning divorce and bankruptcy please call us on 020 7467 3980 or email our Head of Family, Priya Gill at pg@summitlawllp.co.uk.