Could Bankruptcy Be Used As a Tool of Spite in Divorce?

It seems incredible to think that anyone would make themselves bankrupt just so as to spite their ex-wife or husband but that possibility may arise in the future, depending on the outcome of a current UK case.

Bankruptcy should never be considered an easy option, as it will leave the bankrupt not only losing any assets and having to start again, but it's implications will continue also for some years in terms of ability to borrow money, employment prospects and so on. However, in the UK, compared to many other jurisdictions, the period of bankruptcy, being only 1 year for most bankrupts, is a relatively short period.

The general rule with bankruptcy is that it wipes the slate clean of all existing debts, but there are just a few exceptions, and one of these relates to family proceedings financial orders.

In the relevant case now before the English Courts the ex-husband still owes his ex-wife several hundred thousand pounds and his argument is that whilst his bankruptcy ended several years ago, there is a very low prospect that he will be in a position to pay off the amount owed in the foreseeable future. He argues that if he is forced to give his ex-wife money, this will be at the expense of other outgoings he has, which in turn could result in him being made bankrupt again.

This is clearly an important and very difficult issue to resolve and one which, to an extent, is one of public policy as well as law. On the one hand it may be a case of "you can't get blood out of a stone" and goes against the principle that after bankruptcy the bankrupt gets a fresh start. On the other hand, opening up the possibility of avoiding making a lump sum payment to an ex-spouse where there is potential malice could be seen as an option by some husbands or wives, even perhaps if they are not objectively insolvent.

With bankruptcy, it is open to an individual to seek to declare themselves bankrupt in addition to a bankruptcy petition being issued by one or more creditors. If the courts decide that bankruptcy might nullify lump sum debts to ex-spouses, we could also face the bizarre possibility of bankruptcy being contested by a spouse on the basis that the individual claiming to be unable to pay his or her debts can in fact pay those debts and should not be considered insolvent.



Source by James Swede

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