Q&As

Where a party is made bankrupt in the course of financial remedy proceedings, prior to a final order being made, and the only significant asset is a jointly-owned property, will the non-bankrupt spouse have any entitlement to the proceeds of sale?

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Published on LexisPSL on 20/04/2020

The following Family Q&A provides comprehensive and up to date legal information covering:

  • Where a party is made bankrupt in the course of financial remedy proceedings, prior to a final order being made, and the only significant asset is a jointly-owned property, will the non-bankrupt spouse have any entitlement to the proceeds of sale?

It is not uncommon for financial remedies proceedings and bankruptcy proceedings to be ongoing at the same time, sometimes with the specific intention of the bankrupt party to frustrate financial remedies proceedings. Under section 306 of the Insolvency Act 1986 (IA 1986):

'(1) The bankrupt’s estate shall vest in the trustee [in bankruptcy] immediately on his appointment taking effect or, in the case of the official receiver, on his becoming trustee.

(2) Where any property which is, or is to be, comprised in the bankrupt’s estate vests in the trustee (whether under this section or under any other provision of this Part), it shall so vest without any conveyance, assignment or transfer.'

Therefore, once a bankruptcy order is made, the trustee acquires the interest of the person made bankrupt. If the property is owned by the parties as joint tenants, the starting point, subject to challenge, is that the trustee is entitled to 50% of the equity in the property and, as such, they can apply under section 14 of the Trusts of Land and Appointment of Trustees Act 1996 for an order for possession and the sale of the property. In Re Holliday (a

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