Many marriages founder, partly due to the pressures resulting from financial problems and when couples come to separate they may find themselves already in a position of significant indebtedness with no foreseeable way of ever being able to pay off their debts, many of which are carrying interest at a high rate.
Of course, it is best to discharge the indebtedness and have a clean slate if at all possible, but in those cases which appear to be hopeless, there are always ways in which the law affords its protection to people who otherwise would have no chance of making a fresh start.
The law concerning Bankruptcy Administration Orders and Individual Voluntary Arrangements is very complex and the following is designed to be an outline only of the broad law.
By declaring oneself bankrupt, the effect is to pass the ownership of one’s assets to initially the Official Receiver and subsequently, if appropriate, to a person appointed as an Officer of the Court called a Trustee in Bankruptcy. It is the Trustee’s job to convert all of the assets (excepting exempt assets such as the tools of the debtor’s trade) into cash and distribute it to the creditors fairly. If the bankrupt jointly owns property, then the Trustee will usually not be able to take any action for a year if the property is still occupied by the bankrupt’s husband or wife and children, but after that time the Trustee will in all probability, wish to sell the bankrupt’s share of the house and will have every right to do so. It is possible that the bankrupt’s wife or husband in those circumstances will be given the option of buying the bankrupt’s interest at its market value, taking into account any outstanding mortgage.
The Trustee may ask the Court to make an Order requiring payment of a proportion of the bankrupt’s income for a period of up to three years. A Bankruptcy Order will usually last for a maximum of one year, after which time none of the relevant debts will be enforceable.
Even if the Family Court makes an Order in relation to your financial circumstances whether it is as a result of an agreement between you, or the Judge making an Order after a trial, if either yourself or your spouse is subsequently made bankrupt the Trustee can apply to the Court for that financial settlement to be overturned.
Individual Voluntary Arrangements
This enables the debtor to obtain protection from his creditors for a short period while he proposes an arrangement to satisfy his debts and also arrange his affairs which is known as Voluntary Arrangement. The Voluntary Arrangement allows the debtor to have more control of his affairs and can therefore contain quite a degree of flexibility. This form of arrangement is particularly useful if a person wishes to avoid the stigma of bankruptcy and wishes to keep more control of his or her affairs, and in particular wishes to retain a matrimonial home in which there is significant equity.