The impact that bankruptcy and divorce proceedings have on one another has been subject to several cases in both the bankruptcy and family courts. Unfortunately, it is not uncommon for bankruptcy proceedings to be in existence at the same as divorce proceedings and concurrent proceedings can create conflict because of the tension between the interests of the bankrupt's creditors, and the interests of the bankrupt’s spouse and any dependants.

Whereas the family court looks to make an order dividing the parties' assets between them (known as a property adjustment order) having regard to their future needs (including children and dependants), the bankruptcy court will look to distribute the bankrupt spouse's assets in accordance with the rules governing the distribution of assets in bankruptcy. This potential conflict needs to be carefully considered and the timing of when the bankruptcy proceedings were opened compared to when the property adjustment order was made will be the main consideration.

This Practice Note looks at the different stages of the bankruptcy process and the impact each stage will have