Tag Archives | bankruptcy

Wives to be short-changed on bankruptcy?

There is a very interesting case in the High Court at the moment.  It involves the difficult relationship between the family court jurisdiction and the civil jurisdiction, specifically how the court deals with insolvency or bankrupty claims following a divorce.  A former company director, is asking the court to agree that his bankruptcy should release him from any obligation to pay his ex-wife the unpaid balance of a lump sum she was awarded in their divorce.

The ex-husband, Alexander McRoberts, agreed, amongst other provisions, to pay his ex-wife a lump sum of over £500,000.  The sum was payable in instalments. But, as can often happen with elements of a court order that have an on-going nature, a subsequent event some three years later has upset the applecart. In this case the event is in the form of Mr McRoberts’ bankruptcy, and this has led him to ask the court to write off the debt.  The problem, from Mrs McRoberts’ point of view, is that she is still owed £394,000 and she would like the orginal order, granted in the family court, to be honoured, thank you very much.

Generally speaking, the lump sum order to Mrs McRoberts survives her husband’s bankrupty – indeed, the news reports indicate she was a creditor in his bankrupt estate.  The judge in this case has reserved judgment and there will be many family lawyers awaiting this particular decision. The concern for ex-wives, awarded lump sums in this fashion, is that the award by a family court can then be dumped (potentially) by the husband later becoming bankrupt.  This is a case that could open the floodgates to many other applications by insolvent ex-husbands seeking to be released in the same fashion.  Should the court grant Mr McRoberts his wish, I anticipate that other ex-wives facing similar petitions for bankruptcy by their divorced husbands in the future will be resisting at all costs if they smell a financial rat.

Watch this space.