What Will Happen To The Matrimonial Home If A Spouse Becomes Bankrupt?
Posted on 26th May 2020
When a spouse becomes bankrupt, their property will vest in the trustee in bankruptcy. This means that a bankruptcy estate is created, and a bankruptcy trustee is needed to step in to play the role of overseeing the bankruptcy estate and performing various duties required both by law and the individual circumstances of the case. Where a matrimonial home is in the sole name of the bankrupt spouse, the non-owning spouse’s matrimonial homes rights will bind the trustee and the creditors. That said, the trustee in bankruptcy can apply to the court to ask that the matrimonial home is sold to satisfy the creditors and they can do this whether the house is in the sole name of the person who is bankrupt or in the joint names of the bankrupt and the spouse.
Will the Court order a sale the family home if my spouse is bankrupt?
Before ordering the sale of a property, the Court will consider the following factors: -
- The interest of the bankrupt’s creditors
- The conduct of the spouse or former spouse, with regards to their contribution to the bankruptcy
- The needs and financial resources of the spouse or former spouse
- The needs of any children
- Any specific circumstances of the case
It is important to note that if the trustee applies more than one year after the bankruptcy, the Court will assume that the interests of the creditors outweigh all other considerations unless in exceptional circumstances. What is worrying is the fact that a spouse and children will become homeless is not likely to be regarded as an exceptional circumstance as was discovered is the case of Re Citro. Whilst there is no definition of what exceptional circumstances will amount to, although we do have two examples of the circumstances the Courts are looking for in the cases of Judd v Brown 1998 and Re Haghighat the former dealt with a wife suffering from cancer whilst the latter dealt with a severely disabled adult child who required constant care.
Will the Courts make a financial order if a spouse is bankrupt?
In financial matters if the Court makes a property adjustment order in favour of the spouse of someone who is bankrupt, the trustee will take subject to that spouse’s interest provided that the property adjustment order has become effective (for example the decree absolute has been pronounced) at the date of the presentation of the bankruptcy petition.
Our Family Law Solicitors in Preston take this opportunity to remind you that as a spouse of the bankrupt, a person would not be protected if there was evidence of fraud such as collusion between the spouses to affect the creditor or where there has been a failure to make full and frank disclosure.
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