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JGM, Solicitor
Category: Scots Law
Satisfied Customers: 12174
Experience:  30 years as a practising solicitor.
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My wife is going bankrupt as a sole trader with approx £79k

Customer Question

My wife is going bankrupt as a sole trader with approx £79k of collective debt. We had up until June 29 2013 owned a house which we sold with an available equity contribution towards our new house of £31k. Due to my wifes credit rating we were unable to get a joined mortgage and therefore elected to put it solely in my name and transfer her share of the equity to myself. I am aware during the pending insolvnecy or sequestration in Scotland as it will be a 50% share of the equity will have to be made available as part of my wifes estate to pay back the creditors.

During the period of 29/06-20/08/13 (the date which we decided the business could not be sustained) my wife elected to use some of her equity to maintain the business with the aspiration that further trading would turn the situation around.

The question is that does this use of equity from the sale of the previous house reduce the liability of equity in the new house (my wifes share) that needs to be made available to the estate for the creditors
Submitted: 4 years ago.
Category: Scots Law
Expert:  JGM replied 4 years ago.
Thank you for your question.

No it doesn't as that equity no longer exists and is not an asset of your wife's that can be utilised by the trustee.

Happy to discuss further.

I hope this helps. Please leave a positive response so that I am credited for my time.
Customer: replied 4 years ago.

Thank your for your prompt response, the feedback I am having from the insolvency practitioner is that they would suggest my wife was trading insolvently at that time and that they would see this as a loan from me to her rather than her elected use of funds.


The basis for this was that the transferal of funds from my wife to me was unconditional.

Expert:  JGM replied 4 years ago.
If the funds were owned jointly I don't see how it could be treated as a loan from you to her, certainly not more of half of the funds in any event. And the funds were put into the business this presumably increasing the asset value of the business in any event.

I don't think an insolvency practitioner would have much chance of recovering the funds from the equity in the house. This is an unrealistic suggestion in my opinion.