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Marriage Separation & Bankruptcy
How a non-bankrupt spouse can claim more than 50% of property in a bankruptcy.
When one spouse is made bankrupt the laws of bankruptcy generally give a division of 50% of assets, such as the family home, to creditors. However it is possible for the non-bankrupt spouse to claim a greater share than 50% by applying to the Family Court.
In an application for property division the Family Court has the power to award the non-bankrupt spouse a share from any of the bankrupt’s assets that have been taken to pay creditors. The court is required to consider creditors as well as the non-bankrupt spouse, but does not have to give creditors priority.
There are various factors the court must consider, particularly if creditors may end up not being fully paid out from the bankrupt’s assets. Nonetheless the law allows the Family Court to disregard creditors and make orders giving more than 50% of the matrimonial property to the non-bankrupt spouse.
Even though the situation following a bankruptcy may sometimes appear hopeless, an application for property division brought by a non-bankrupt spouse in the Family Court may well offer some hope.
We are happy to discuss any concerns you may about these matters.