Why Christmas is not always a merry time
2nd December, 2014
It is a sad fact of life that many divorce lawyers find their busiest times occur just after the festive season finishes.
In particular, we are increasingly seeing couples break up around this time because of financial pressure and worries.
For example a spouse may be spending more than they can afford or incurring debt without the other knowing about it which can lead to serious difficulties, especially where one spouse is forced into bankruptcy.
So what happens if a spouse becomes bankrupt? What will become of the family home?
All property belonging to or vested in the bankrupt at the date of the bankruptcy order will automatically vest in the trustee, who is someone appointed to administer the bankrupt’s estate.
If there is a family home, then this will not escape the bankruptcy but will form part of the bankrupt’s estate.
This means that if there is equity in that property, the trustee can look to realise that equity by forcing a sale of the property.
The trustee has three years in which to realise the interest or else it will automatically re-vest in the bankrupt.
Often family homes are in joint names so that if one party is made the subject of a bankruptcy order their 50% beneficial entitlement will vest in the Trustee.
At least this provides some security for the non-bankrupt’s spouse as the Trustee must limit their claim to 50% of the equity.
It also means that the non-bankrupt spouse can negotiate with the trustee to buy out their interest and sometimes this can be done without having to pay out the full amount of the other’s half share.
For example, this can be done where a spouse has given security for the other’s secured liabilities such as half share of the mortgage payments or where a spouse has given security for the other’s debts.
If you believe your spouse is or is likely to become bankrupt you must obtain urgent advice from both family and insolvency lawyers.
For more information on the issues raised in this article, please contact Jonathan Flower.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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