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Divorce and Bankruptcy – What you need to know
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Divorce and bankruptcy, together can be a difficult mix for anyone to deal with. In this article our expert divorce lawyers share with you the key issues when dealing with divorce and bankruptcy.
A recent judgment has been published in which a claim by a trustee in bankruptcy under the Matrimonial Causes Act 1973, against the deceased bankrupt’s ex-wife, has been dismissed.
In 1999, Sarah Woodall and the late Jonathan Elichaoff got married.
Sarah Woodall filed for divorce in November 2008. Two months later, Mr. Elichaoff was served a statutory demand by one of his creditors. By March 2009, Mr. Elichaoff was presented with a bankruptcy petition against him.
In July 2009, a consent order stating that Mr. Elichaoff would give back his wife the £1.4 million he’d borrowed from her and pay his wife and daughter £24,000 per annum each in maintenance, was approved by a judge.
Mr. Elichaoff was made bankrupt on 7 July 2009 – just days before the judge approved the consent order. The judge who approved the consent order did not know about the bankruptcy.
The trustee in bankruptcy, Ian Robert, applied for a declaration to make the consent order void and for Ms Woodall to pay off an amount equivalent to her ex-husband’s debts under the Matrimonial Causes Act 1973. This application was made six years after the consent order was approved. Mr. Robert claimed that Mr. Elicahoff’s spousal claims under the Matrimonial Causes Act 1973 were vested in him because they were part of the Mr. Elicahoff’s estate.
In a hearing earlier this year, a registrar struck out the trustee’s applications and ordered Mr. Robert to pay a proportion of Ms Woodall’s costs because Mr. Elichaoff had died in 2014 and claims under the Matrimonial Causes Act 1973 could only actually be pursued by spouses and any rights do not ‘extend beyond joint lives’. This was still the case even though the registrar found that Elichaoff’s dispositions under the 2009 consent order were actually void.
Mr. Robert then appealed to the High Court. The High Court has now ruled against him.
What were the judge’s reasons for the ruling?
The judge said that they agreed with ruling of the previous courts, that because the bankrupt, Mr. Elichaoff had died, his rights under the Matrimonial Causes Act 1973 had come to an end and the trustee in bankruptcy couldn’t have a greater claim than the bankrupt themselves.
There are some cases where this will not apply such as when an order for secured provision was already obtained before the spouse died.
What is the significance of the judgment?
This case, which centres around divorce and bankruptcy, provides clarification that the ability to pursue financial orders when couples divorce, is personal to the bankrupt.
The decision of the High Court shows us that the rights created by the Matrimonial Causes Act 1973 can only be pursued by the spouses themselves and were not able to be vested in a trustee in bankruptcy after the death of one of the spouses.
The full judgment can be found by visiting this link.
For more information on this subject please visit our Legal Library.
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09th December 2016
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