The amount of people filing for bankruptcy has increased dramatically in the past few years, all stemming from the outrageously high cost of living that seems to haunt us. From exorbitant fuel and food prices, to vehicles, education and property, prices all over the world seem to be skyrocketing, and there isn’t really anything you can do about it.
Bankruptcy can be an option for many people facing financial problems. But further problems could arise if you are facing a marriage break down while trying to sort out your financial affairs.
When a marriage breaks down, it is an emotional and stressful time for everyone involved, and the last thing you need is the added stress of having to deal with financial matters that need to be sorted out. Usually in a marriage, all assets accumulated during the course of the marriage are divided equally among the spouses as part of a financial settlement. But what if one of the spouse’s is bankrupt?
Recently, people facing a divorce have been warned that they risk losing their assets to meet their former spouse’s demands. In a landmark ruling by the High Court, it was stated that the protection loophole for spouses to enjoy their share of assets ordered on a divorce has been closed. In other words, if one of the spouse’s goes bankrupt during a divorce, the other will be exposed to creditors as well. And bankruptcy trustees will be able to pursue the non bankrupt spouse for up to five years.
So what can you do if you find yourself in this unfortunate position? The best option you have would be to sort out all financial issues before the bankruptcy takes effect. If you know you are planning a divorce, you can take steps to ensure the bankruptcy does not affect you. Bankruptcy is usually threatened quite some time before any action is taken, so an application to the family court to settle any financial issues should be made before the bankruptcy takes effect. The Trustee in Bankruptcy may be able to help you. Certain parts of your financial settlement could be put aside, which may minimise the effect of bankruptcy on the non bankrupt spouse.
But what if bankruptcy is already in place? If the bankrupt is not yet insolvent, the spouse may still be able to apply for bankruptcy annulment from the court. In some instances the family court may order the bankrupt to pay a lump sum or maintenance if the bankrupt has a relatively good income despite being insolvent.
In some cases, however, bankruptcy can work in the non bankrupt’s favour. Until just recently, a person who owed money as part of a divorce settlement could apply to make their former spouse bankrupt, but could not have the debt proved in that bankruptcy. However, the money paid by the bankrupt is part of the bankruptcy and the bankrupt is not released from these debts until the bankruptcy has ended.
Bankruptcy will always have serious implications for the financial settlement on divorce. You should be sure to seek the best legal advice you need where both bankruptcy and divorce are concerned. This will ensure you get the best financial settlement so both you and your former spouse can enjoy a financially sound future.