Bankruptcy and Divorce 

Written by admin

January 18, 2021

Bankruptcy - Wording on Pocket Watch. 3D.
Are you going through a divorce and are concerned that bankruptcy is on the horizon for your spouse? If so, the first thing to do is to act quick because if a bankruptcy order is made before the making of a financial order upon your divorce, then your spouse’s assets will vest in the trustee in bankruptcy.

That said,  it doesn’t mean that your spouse is free to just declare themselves bankrupt as a tactic to try and defeat your financial claim against them in the divorce. If there is evidence that your spouse has tried to defeat your claim by making themselves bankrupt during ongoing divorce proceedings, the bankruptcy order can be overturned.

So what is the position if a bankruptcy order is made after a financial order is made upon your divorce? Whilst your financial order should be ‘safe’, if a periodical payments order has been made in your favour, there is always the risk that your ex-spouse will apply to the Court to vary those payments downwards. Periodical payments orders are not binding upon the bankruptcy courts. Moreover, if the sale of a property has been deferred, for example, until the youngest child of the family reaches adulthood, the trustee in bankruptcy can apply to bring forward the sale. This is one of the reasons why you should always strive to achieve a ‘clean break’ when going through a divorce. The family court has a statutory duty to consider whether a clean break is appropriate in every case.

The relationship between divorce proceedings and bankruptcy is a complicated one. If you are going through a divorce or have gone through a divorce and there is any suggestion of your spouse/ex-spouse being made bankrupt, it is important that you seek specialist independent legal advice.

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