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Divorcees may fund ex's debts
10/05/2007
An unprecedented decision yesterday ruled that a divorcee would have to fund creditors when her ex-husband was declared bankrupt, the Times reports.
Solicitors have predicted an influx of trustees in bankruptcy trying to claim assets from divorce cases, as at least 20 per cent of the 120,000 people who are declared bankrupt this year will be divorcees.
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Although Wendy Pearl Haines had petitioned for divorce from her husband David in 2003, the High Court ruled that she would have to return her husband's share of the house she was awarded when they divorced, if her ex found no other way out of his bankruptcy, for which he filed in 2005.
Instead of her receiving a lump sum on settlement, the house had been transferred to Ms Haines, because there was even then a risk that her husband would become bankrupt, after the couple were adjudged to have lived "beyond their means", by the judge at the time.
The court order in contested matrimonial proceedings was ruled as a "transaction" for the purposes of the terms of the Insolvency Act 1986 and was therefore of valuable consideration.
This outcome now means that any assets won in contested divorces in Britain and Northern Ireland will not be secure and will remain pursuable for five years after the divorce.
Gareth Schofield, a family law expert, said: "This is a complete reversal from the widely accepted position that divorce settlements made by the matrimonial courts after a fully contested hearing are beyond reach in bankruptcy cases and cannot be overturned by a bankruptcy court.
"This decision will have a profound effect on the way clients are advised on settlement in divorce where bankruptcy is a potential issue."
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Solicitors have predicted an influx of trustees in bankruptcy trying to claim assets from divorce cases, as at least 20 per cent of the 120,000 people who are declared bankrupt this year will be divorcees.
.
Although Wendy Pearl Haines had petitioned for divorce from her husband David in 2003, the High Court ruled that she would have to return her husband's share of the house she was awarded when they divorced, if her ex found no other way out of his bankruptcy, for which he filed in 2005.
Instead of her receiving a lump sum on settlement, the house had been transferred to Ms Haines, because there was even then a risk that her husband would become bankrupt, after the couple were adjudged to have lived "beyond their means", by the judge at the time.
The court order in contested matrimonial proceedings was ruled as a "transaction" for the purposes of the terms of the Insolvency Act 1986 and was therefore of valuable consideration.
This outcome now means that any assets won in contested divorces in Britain and Northern Ireland will not be secure and will remain pursuable for five years after the divorce.
Gareth Schofield, a family law expert, said: "This is a complete reversal from the widely accepted position that divorce settlements made by the matrimonial courts after a fully contested hearing are beyond reach in bankruptcy cases and cannot be overturned by a bankruptcy court.
"This decision will have a profound effect on the way clients are advised on settlement in divorce where bankruptcy is a potential issue."
Contact us for legal advice
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