The impact of bankruptcy on divorce proceedings
The impact of bankruptcy on divorce proceedings

The following Restructuring & Insolvency guidance note provides comprehensive and up to date legal information covering:

  • The impact of bankruptcy on divorce proceedings
  • The bankruptcy order is made before the property adjustment order
  • The property adjustment order is made before the bankruptcy order but after the presentation of the bankruptcy petition
  • The property adjustment order made before the bankruptcy proceedings commence
  • Challenges

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 on divorce proceedings. For further reading on the relationship between the courts and concurrent proceedings see:

  1. Bankruptcy and family financial remedy proceedings—overview

  2. Practice Note: The bankruptcy court's power to set aside financial orders made on divorce or dissolution of a civil partnership

  3. Practice Note: Can the court annul a