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My Ex-partner Invested in Property and now he is Bankrupt

Circumstances

 

You may be in the situation where you are trying to sort out financial issues to end your relationship with your ex-partner when you are confronted with all his or her debts and very little in assets to cover them.

 

Can you do anything to protect your contribution to the relationship and your ability to move on?

 

Bankruptcy and Family Law

 

In 2005 the legislation was changed to, in some measure, rectify this situation.

Bankruptcy and Family Law Legislation Amendment Act 2005 changed the law so that the vesting sections of the Bankruptcy Act 1996 (Cth) are subject to orders made under Pt VIII of the FLA (Family Law Act).

 

This means that the income of the bankrupt spouse does not vest in the trustee so that the non-bankrupt spouse can seek maintenance. Further the non-bankrupt spouse has the right to share property of a bankrupt spouse.

 

Trustee as party to property settlement proceedings

 

The bankrupt party must notify all parties to the case and also the bankruptcy trustee of the family law proceedings. As well the trustee must notify the non-bankrupt spouse of any application for an order to vest the bankrupt’s property in the trustee in bankruptcy.

 

The Amendment gives the non-bankrupt spouse protection both through transparency and disclosure and also in securing property that would normally vest in the trustee and divesting the non-bankrupt party of any claims to the property.

 

The Four-Step Process

 

In Family Law proceedings, the Court considers four steps in dividing the property of the parties. The High Court in Stanford v Stanford (2012) 247 CLR 108; HCA 52 stated that any alteration of property rights must be just and equitable. The Courts proceed to identify and value all assets and liabilities; evaluate the contributions of the parties and consider the future needs and available resources of the parties.

 

The trustee is substituted for the bankrupt spouse in proceedings and the Court is then able to make orders to alter the property rights of the parties according to just and equitable principles.

 

The Amendment gives the non-bankrupt spouse protection both through transparency and disclosure and also in securing property that would normally vest in the trustee and divesting the non-bankrupt party of any claims to the property.

 

Each Case is Different

 

Each family has different circumstances. There may be family trusts and tax implications in any property settlement so it is important to seek appropriate legal advice.

 

The Court will be guided by the overarching principle of making a just and equitable alteration of property rights and in the case of a bankrupt, whether it would be just and equitable to substitute the trustee for the husband at the expense of any creditors.

 

Please contact our office if you are experiencing difficulties settling any property dispute with your former partner.

 

 

 

 

David H. Cohen & Co