Read more articles in: Blog, Family Law, Stuart Daniel

What impact does bankruptcy have on divorce proceedings?

Divorce proceedings can be a tricky process to navigate, but when bankruptcy is added to the mix, the complications are compounded.

According to the Insolvency Service, bankruptcies recorded in May 2024 reflect a three per cent increase compared to the same period in 2023.

If you find yourself in a situation where you are going through a divorce and have bankruptcy matters to deal with, there are several factors to consider to make sure the divorce process is as smooth as possible.

The family home and financial assets

The family home is usually one of the most valuable assets in a divorce.

If one spouse declares bankruptcy, their share of the home’s equity typically passes to the trustee in bankruptcy.

The trustee’s role is to realise the bankrupt party’s assets to repay creditors, and this can include selling the home.

However, if children are involved, the courts may delay the sale to prioritise their needs.

This allows the non-bankrupt spouse and children to remain in the home temporarily.

If the home is solely owned by the non-bankrupt spouse, they may have more security, but any financial contribution from the bankrupt party toward the property could still be claimed by the trustee.

Child arrangements

In terms of child arrangements, bankruptcy does not directly affect custody or visitation rights.

The Family Court’s primary concern is the well-being of the children, regardless of a parent’s financial situation.

However, financial obligations like child maintenance may be impacted by bankruptcy.

Although child maintenance obligations cannot be discharged in bankruptcy, the bankrupt parent’s reduced income may lead to a reassessment of the amount they are required to pay.

If you are going through a divorce complicated by bankruptcy, contact our legal team for advice and support.

Stuart Daniel

Head of Family Department

I qualified as a Solicitor in 2006 and now specialise in divorce, financial settlements, childcare arrangements and Pre Nuptial Agreements. I have many years’ experience as a private family lawyer having worked with two other local firms before returning to Mander Hadley, where I first undertook work experience during my university studies.