Divorce And Bankruptcy
Bankruptcy has a direct impact on how the division of property is addressed in family law proceedings in a number of ways. If you or your spouse have declared bankruptcy or are considering declaring bankruptcy you need to understand the consequences this could have to your division of property.
If you declare bankruptcy after a separation but before a settlement or court decision is made on your property entitlement, your share of the property may vest in your trustee in bankruptcy and not you.
If you have a spouse that is thinking about declaring bankruptcy, you need to inform yourself on whether you can structure a property division regime that will allow for the asset to remain in the family and not fall into the bankrupt’s estate. This may not be possible as it could be a reviewable transaction under the Bankruptcy and Insolvency Act.
If you transfer property out of your name or the name of your spouse to protect that asset from a claim in bankruptcy, that transaction is reviewable not only by your spouse but by the court. If the transaction was done to avoid the property from falling into the bankruptcy estate, that transaction is likely to be set aside by the court and the asset will fall into the pile of assets to be divided to pay creditors.
How debts are dealt with is also impacted by bankruptcy. If your spouse declares bankruptcy before your debt allocation is finalized by settlement or court order, you could find yourself being solely responsible for what was otherwise a joint debt obligation. A good example is a joint loan that was taken out to pay off a credit card debt. If your spouse declares bankruptcy, they are freed from that debt and you can expect the lender to come after you as the sole remaining debtor.
Bankruptcy may seem like a solution to a bad debt situation but in the context of a separation, it could have a significant impact on the other spouse which was not anticipated and for which there may not be a satisfactory resolution.
At Henderson Heinrichs LLP our lawyers can assist in dealing with this type of situation to protect family property. Arrange a free, half-hour consultation by calling us at 1-844-669-3500 or filling our online booking form.