Matrimonial financial orders

PUBLISHED: 14:04 14 January 2010 | UPDATED: 15:11 20 February 2013

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Lulu dress, £149; Rinascimento coat, £119; necklace, £49; handbag, £25: Simply French.

With Britain's personal debt increasing significantly and bankruptcies on the increase, what are the implications when someone is made bankrupt after a financial order has been made on divorce?

With Britain's personal debt increasing significantly and bankruptcies on the increase, what are the implications when someone is made bankrupt after a financial order has been made on divorce?

When couples divorce the ideal financial settlement for assets is a 'clean break' when neither party has future claims against the other. Often this involves a property being transferred from joint names to one party alone. However a recent case that attracted widespread media attention, Hill v Haines, highlights the problem that increased personal bankruptcy is having on long-term financial planning. Under a divorce court financial order, Mr David Haines transferred his interest in the family home to his former wife. However he applied to make himself bankrupt only a few months later. The court had known of his substantial debts, which amounted to about 130,000 at the time of the bankruptcy order.

A Trustee in Bankruptcy has an obligation to maximise possible amounts for distribution among creditors. The Trustee in Bankruptcy of Mr Haines applied to set aside the matrimonial order on the basis that Mrs Wendy Haines had not provided "consideration" for the transfer, whether by paying cash for her former husband's share or agreeing not to claim against other assets.

Initially the court dismissed the application. The Trustee in Bankruptcy successfully appealed in May 2007 and it looked as though the matrimonial order would be totally set aside, with the property having to be sold or Mrs Haines having to raise a substantial sum to pay to the Trustee.

As a result of this decision, it seemed that there would be no certainty of achieving a clean break until five years after a matrimonial court decision, when the ability of a Trustee in Bankruptcy to apply to cancel such an order would cease.

Mrs Haines appealed to the Court of Appeal, which considered the case on 5 December 2007. The appeal judges concluded that the matrimonial order should in itself be treated as relevant consideration, unless some collusion between husband and wife could be shown. This protects the divorcing family and helps to maintain a fair balance between matrimonial and insolvency law. Common sense has prevailed.

In a final attempt to recover the outstanding monies, the trustee in bankruptcy of Mr Haines is now reported to be petitioning the House of Lords for a final challenge over the case which could have 'far reaching implications' for the powers of the divorce courts.

However this decision does not apply if it is the person in occupation of the property who becomes bankrupt, or if the other party has retained an interest in a property, payable at some future time, and is made bankrupt in the meantime. In each of those cases the property may have to be sold, although if there are still children of the family living in the house, a court may be prepared to defer a sale in some circumstances.

Please note that sole debts of an individual which have been incurred after divorce, or for which that person was left responsible at the time of a financial settlement, will still be that person's individual responsibility. Problems should now only arise if that individual becomes bankrupt while still having an interest in a matrimonial property, whether before or after a financial order has been made by a court.

About Taylor Walton
Taylor Walton, with offices in Harpenden, St Albans and Luton, is Hertfordshire's largest law firm serving clients across the South East and Northern Home Counties. The firm has a strong reputation for Private Client and Family law and is extremely experienced in dealing with the affairs of high net-worth individuals, including divorce and financial disputes between separating couples, disputes over children, tax planning, philanthropy, probate and will disputes, as well as property transactions. It also has a highly rated commercial division.

Clients requiring advice on Family law can contact Aileen Hartnett - Partner and Head of the Family Department on 01582 765111 or email A longer version of this article together with further details of our services can be found on our web site

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