There is a shocking report in The Daily Telegraph which states that an ex-wife of a bankrupt can have her settlement overturned, if her ex husband goes bankrupt within 5 years, even if the settlement was made after consideration of all the factors of the case and a Consent Order was drawn up in the normal way.
The reported case states that the transfer of the house to the wife was a transaction at an undervalue, she gave no consideration, apparently she had no periodic payments claim to offset and therefore it can be set aside.
The report claims that this worsens the position for ex-wives. However, the trustee in bankruptcy has always had the power to challenge a transaction at an undervalue (such as the transfer of the former matrimonial home) and to challenge a preference (such as a lump sum order). A declaration of solvency is always a good idea at the time of the settlement as this reduces the time period that the trustee can act from 5 to 2 years.
Perhaps, what this case has done has made it easier for a trustee in bankruptcy to establish a transaction at an undervalue and will encourage more trustees to make an application. Previously there was an assumption that an order made after due consideration of the facts of the case was unreachable by a trustee in bankruptcy
The wife’s solicitors are appealing and it is estimated that this case will affect 20% of the 120 000 people expected to file for bankruptcy this year.
Divorce and bankruptcy often go hand in hand. If you think your spouse is about to become insolvent it is important to act quickly in an attempt to protect your matrimonial claim!