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leanne-jones, Barrister
Category: Bankruptcy Law
Satisfied Customers: 183
Experience:  Barrister
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Hi - I have a question regarding bankruptcy/insolvency and

Customer Question

Hi - I have a question regarding bankruptcy/insolvency and divorce.

I was made bankrupt in 2007 and had a joint mortgage shortfall with my then wife of around £28k. My bankruptcy released me from my part of the liability for this debt, which meant my wife became liable for the full remaining balance.

We then separated in 2010, and are now moving forward with the divorce mid 2013.

Since my bankruptcy, my wife has not acknowledged this debt, has moved house, ignored letters and phone calls from the creditor, and has refused to take responsibility for it. It still exists in its entirety, plus interest and further charges.

However, she's now insinuating that I need to repay this debt (either directly to the creditor, or via maintenance payments to her) as it could technically be classed as 'matrimonial debt', and should be part of the pot that needs to be divided. Note, there are no assets in the pot - just this debt.

I have spoken to an insolvency practitioner who has advised me that this cannot happen. He quoted the Insolvency Act 1986 (Specifically sections 285 and 281) which in effect suggest that both before and after discharge, no creditor [of mine] can have any remedy against a debt that was included in my bankruptcy.

Basically, the way I understand it is that if I am forced to give anyone money to settle debt that was included in my bankruptcy, then the ONLY person I am able to legally give this money to is the Official Receiver.

I also understand that if I was to help clear one specific debt that was included in my bankruptcy, it would effectively mean that that particular creditor was being paid at the expense of other creditors, which isn't allowed under the terms of the bankruptcy.

In other words, it would be an offence, under the Insolvency Act, for me to pay (or contribute) to this loan - and if a family law judge ordered me to pay it as part of a financial order then he/she would effectively be annulling my bankruptcy.

The botXXXXX XXXXXne is that one judge has already made an order under insolvency law that I mustn't pay the debt, so I can't see how a different judge can overturn that and make me pay it under family/matrimonial law.

Does that make sense?

If possible, I'm just after some confirmation from someone with both family law and insolvency law experience that this could potentially be the case.
Submitted: 4 years ago.
Category: Bankruptcy Law
Expert:  Alex J. replied 4 years ago.

ajlaj01 :

Hi, Thank you. The bottom line is the debt is entirely in your wifes name as you were released from it by virtue of bankruptcy then all she is doing is burying her head in the sand. The creditor will eventually just seek to enforce on her and worse case scenario make her bankrupt.

ajlaj01 :

It wouldnt be illegal for you to pay towards this debt, as any payment would be made from your post bankruptcy estate.

ajlaj01 :

If you have the means have you considered whether you could buy the house off her and take over the mortgage at a discount?

ajlaj01 :

I look forward to hearing from you.

JACUSTOMER-5oz7nled- :

Hi - thanks for you answer, although I already know that she is liable for the full amount. My question is about whether this debt can be brought up as 'matrimonial debt', and whether a family court judge can instruct me to pay this back, either direct to the creditor or via my wife as maintenance payments, as part of a financial order.

JACUSTOMER-5oz7nled- :

My understanding is that if a family judge orders this, then effectively he is overturning my bankruptcy.

I also understand that it would against my obligations to the Insolvency Act for me to pay this debt, and NOT any others that were included in my bankruptcy as that would be seen as favouring one creditor over and above the others.

And finally, I understand that if I was ordered to pay this debt (despite already being made bankrupt for it) then I should be paying that money to the official receiver who will distribute it to ALL of the creditors.

These are the points I needs clarification on - and ideally from someone with experience of both family law and insolvency law, and how they interact with one another in the court system.

JACUSTOMER-5oz7nled- :

(There is no house - that was voluntarily repossessed around the same time as bankruptcy.)

Expert:  leanne-jones replied 4 years ago.
Hello - my name is Leanne and it will be my pleasure to assist you today.

You are correct. Your bankruptcy can not be overturned by a family Judge.

There would need to be an application made to annul the bankruptcy, if this has not been done then you can not pay the bankruptcy debt. All debts must go through the Trustee.

So if the decision has been made by the Family Judge it should be appealed, as this is wrong in law.

But a Family Judge can not overturn a bankruptcy and make an order to which is included in the Bankruptcy and dealt with by the Trustee.

I hope that clarifies matters and if you need further help please contact me.

Customer: replied 4 years ago.

Hi - thanks for your response.


However, I think you may have misread my question. I have a suspicion that during the ancillary relief process, my wife will raise this joint debt that still exists (albeit ONLY she is liable for, because of my bankruptcy) as 'matrimonial debt'.


To simplify things, this debt my wife has is £28k. I currently have zero debt. And as there are no assets on either side of the marriage, she will argue that I owe her £14k, in order to 'even out' the matrimonial pot.


So, my question is really about whether I can argue that debts that were included in my bankruptcy, and which still exist because my wife hasn't done anything about them in 6 years, can or should be included in ancillary relief negotiations, given that a judge has already decreed that I have no liability for them under the Insolvency Act.


I'm extremely worried that a court will decide that I am now in debt to my wife, and that I will be ordered to pay her maintenance to cover my theoretical share of the £28k - even though this debt was already included in my bankruptcy.


Any thoughts on how I can argue this?













Expert:  leanne-jones replied 4 years ago.
Yes I can understand.

In reality that debt did exist, so the Judge cant make you liable to even things out.

This is because this debt had been incurred prior to bankruptcy and as such would make it unfair to make you liable for something that you had already dealt with.

Otherwise I assume you would have included any future share in bankruptcy.

So no - do not worry the Judge can not make this order against you.

I hope this clarifies the situation for you.

Customer: replied 4 years ago.

Again, thanks for your response.


Do you know which specific points of law (insolvency or family) that I can refer to in order to strengthen my argument that these previously joint debts should NOT be included in any negotiations leading up to a financial order?


It just seems like such a complicated issue and I'd like to make sure I have everything in order before addressing the issue.

Expert:  leanne-jones replied 4 years ago.
Points of law are beyond the remit of the site.

It may take a few hours to do that, which the site does not permit me to do. But I can say as a lawyer it is one of those things that I do know.

However you are free to search online for this yourself using:
Customer: replied 4 years ago.

OK, fair point.


So, just to clarify, you think that I am able to argue that even though my wife is currently solely liable for this debt, it should NOT be included in any financial negotiations because my interest in it was dealt with via my bankruptcy?

Expert:  leanne-jones replied 4 years ago.

I would also suggest you look at the Insolvency Rules:

Customer: replied 4 years ago.

Yes, thanks - I've actually spent quite a lot of time over the last week or so trying to get my head around the Insolvency Act.


I'm just finding that the family lawyers I speak to aren't sure of my position and suggest that I MAY need to settle this debt with my wife, while the insolvency specialists say the opposite and suggest that this debt should NOT be included in financial negotiations.


That's why I'm so unsure of my position - I'm yet to get a definitive answer that everyone can agree with!



Expert:  leanne-jones replied 4 years ago.
Sure I understand.

As I have helped you please remember to give my answer a great rating - thanks.