The bankruptcy process is one way to deal with debt you can’t pay. The assets of a bankrupt come under the control of a ‘trustee in bankruptcy’ – usually a solicitor or accountant. The trustee will ordinarily sell assets and give creditors an indication of how much they are likely to receive in discharge of the debt owed to them by the bankrupt.

But what happens if the bankrupt is also going through divorce, and is in the process of reaching a financial settlement with his or her spouse? Clearly there will be a conflict of interest between creditors and the spouse when it comes to apportioning the assets of the bankrupt. With bankruptcy and divorce the ownership of the family home is often a major concern, as is the possibility that some spouses may use their status as a bankrupt to frustrate any financial claim against them by their estranged spouse. Bankruptcy during divorce will also lead to practical difficulties when it comes to enforcing lump sum orders and maintenance orders.

Does spouse’s bankruptcy mean I have to leave the family home after divorce?

Often the matrimonial home will represent a significant chunk of a bankrupt’s wealth. This means the trustee in bankruptcy will be keen to realise the interest through selling the property and dividing the proceeds among the bankrupt spouse’s creditors.

The first thing to note is that under the Insolvency Act 1986  a trustee can only enforce a court order to sell a family home after 12 months (unless the court thinks it’s reasonable to proceed with a sale). This gives spouses an opportunity to make alternative living arrangements while remaining in the family home.

If the family home is jointly owned the bankrupt spouse’s share cannot be put into the non-bankrupt spouse’s name without the agreement of the trustee in bankruptcy. Given the trustee’s duty to creditors it’s unlikely that such consent would be forthcoming without the spouse being able to pay the market value of the bankrupt spouse’s share.

When the family home is owned solely by the bankrupt spouse, it’s essential to act quickly to avoid the sale of the property by the trustee. Under the Family Law Act 1996, a non-owning spouse has a right to occupy the property but he or she must register these rights at the Land Registry to be able to enforce them against th etrustee. Once the rights have been registered the trustee will be unable to sell the home without the express consent of the non-owning spouse.

Can I claim a share of my bankrupt spouse’s pension?

Your spouse’s pension won’t come under the control of the trustee in bankruptcy unless it is held in certain unapproved pension schemes. This means that in most cases judges can make orders relating to the pension even when the pension holder is bankrupt.

My spouse is using bankruptcy as an excuse to reduce my financial settlement

It’s not uncommon for a spouse to declare bankruptcy to frustrate an estranged spouse’s financial claim against him or her. In such a scenario it is possible for the non-bankrupt souse to ask the court to set aside the bankruptcy proceedings as an abuse of process (The Insolvency Act 1986 s 282). The question the court will ask is whether or not the bankruptcy order should have been made in the first place. In the case of Paulin v Paulin (2009) for example, the court overturned bankruptcy proceedings when  a husband created a fictitious debt to enable himself to be declared bankrupt with the sole intention of reducing his wife’s financial claim.

If you think your spouse is considering bankruptcy to thwart your financial claims you should seek urgent legal advice. It may be possible to reach agreement on a settlement before the bankruptcy order is finalised. Although your legal advisors should take steps to copper fasten any such agreement so it cannot be challenged by any trustee in bankruptcy appointed once the bankruptcy order is made final.

Got a question? Ask us now…

Kindly complete the form below to send an enquiry. Your message will be sent to one of our solicitors. Discretion is guaranteed.

Your Information

  • Consider including information such as: the name of your spouse (if relevant), the country you live in, the background to your problem.

  • This field is for validation purposes and should be left unchanged.

Over 2000 FREE
consultations and counting…

Our free consultation can help you more clearly understand the legal issues relating your case and what your options are to move forward.

Request your free consultation

Or send us an enquiry

Myself and my mother had a free video consultation with Mr. Brookman regarding my mother's divorce and were both impressed with his knowledge on divorce matters, professionalism and understanding. Henry then followed up with us with a clear plan of what he suggests we do...

Mar 2021   Bruna Cordeiro Pezzano

I had a consultation with Mr. Brookman and was impressed with his honesty, knowledge and understanding of my situation. He seemed to take a genuine interest in my case, which immediately put me at ease.

Mar 2021   Chichi

Very swift response and concise information. I had a very engaging free consultation with Mr Brookman initially which was informative and professional.

Feb 2021   Garry Ralph

I would like to say my experience with Mr Brookman was an extremely positive experience. His knowledge, advice and compassion put me very much at ease and made a very difficult situation much more bearable.

Feb 2021   Jenny Brock

Very helpful, and honest about my situation even though it wasn’t business for them at this time. Would recommend.

Jan 2021   Natalie Roche

Knowledgable, friendly, considerate, and most importantly easy to contact. Brilliant service.

Dec 2020   John Du

I want to highly commend Brookman Solicitors firm. I had the privilege of getting very thorough and sensible advice from their solicitor Jennifer Douglas. I don't have enough praise for her.

Sep 2020   Yesima Hamid

I had an initial consultation and Henry was well prepared. He gave great advice and followed through quite quickly. He was very helpful.

Jul 2020   Jen Ade

I had a free consultation with Henry Brookman. He was incredibly knowledgeable about my complex situation, gave straightforward advice and empowered me to understand exactly how I need to proceed.

Jun 2020   Rebeca Brown

Google Reviews
Ask A Question

Contact Us

If you have questions, contact us now, we can help you.

Enquire Now

Or call us on +44 (0)20 7430 8470