Over the last number of years, it has been quite common divorce and bankruptcy proceedings to take place at the same time.
Bankruptcy is and insolvency process by law whereby all or most of a person’s debts are written off. The effect of this process or any personal insolvency proceedings can cause issues in relation to the separation of assets, and divorce negotiations in general.
The effect of bankruptcy on divorce proceedings
Any assets owned jointly between a divorcing couple cannot be transferred as part of a financial settlement without the consent of the Trustee in Bankruptcy or initially the Official Receiver who is appointed by the Court to review the circumstances surrounding the bankrupt’s affairs.
The Trustee handles all the asset realisation and income of the debtor who is bankrupt. They can deal with the assets comprised in the bankruptcy in various ways and more specifically they are there to maximise the return to creditors. Special consideration is normally given in circumstances where there are children involved.
The Trustee will also review any transactions with connected parties 5 years prior to the bankruptcy Order and 2 years with unconnected parties. A Court application can be made if it appears that certain assets were transferred to the bankrupt’s spouse The Trustee can also make an application to the Court if they feel that assets were not equally distributed as part of the divorce and or that there has been total transparency in the divorce proceedings.
In some exceptional cases, an individual might decide to file for bankruptcy unnecessarily in order to frustrate the other party within the divorce proceedings. However, in these circumstances, the non-bankrupt party can apply to the Court to annul the bankruptcy, if they believe that the other party is not actually insolvent. The Court has the authority to annul the bankruptcy order as part of the legislation covered under section 282 of the Insolvency Act 1986.
In an ideal world, the divorcing parties need to reach a financial settlement prior to the commencement of either party declaring themselves bankrupt and ensure that the Consent Order and Decree Absolute is granted under The Matrimonial Causes Act1973.
Divorce, separation, and the issues concerning breakdown in relationships are often complex specifically if one part is on the verge of insolvency.
Taking advice at the earliest stage is highly recommended.
Over the last 15 years we have dealt with hundreds of couples pointing them in the right direction when it comes to deciding on what options are best suited to your situation.
0330 236 9930, 0330 236 9938 or 07961 116321. All conversations will be in strict confidence. You can also email me vee@navigatebr.com
This article is for information and interest only. It is not a substitute for full professional advice, which will take in to account the specific and individual circumstances. Navigate Business Recovery Limited cannot accept any responsibility for any loss arising as a result of any person or organisation acting or refraining from acting on any information.
Leave a Reply