Unfortunately for some people following the breakdown of their relationship, their financial circumstances become so difficult that they are either forced into bankruptcy by their debtors, or elect to become bankrupt, to have a trustee appointed to manage the payment of their debts. Bankruptcy is not something that only happens following a marriage breakdown, but this short article discusses the impact of bankruptcy on your property settlement, if your relationship has broken down.
If you are declared bankrupt, whether voluntarily or not, from the time that you are declared bankrupt, you no longer have the right to finalise your property settlement on your own terms. From the time of your bankruptcy the trustee in bankruptcy “stands in your shoes” and will finalise your property settlement for you. If you become bankrupt during proceedings before a Family Court, the trustee in bankruptcy will take over your role in the Court case. The legal fees incurred by the trustee in bankruptcy will be added to your bankruptcy debt.
While bankruptcy may seem an attractive prospect to some people, the impact of bankruptcy can have additional unexpected and unintended consequences. For most people, bankruptcy following a relationship breakdown means that they will not receive any money or assets from the division of their property, but will instead have their share of the assets of their marriage or defacto relationship, paid to the trustee in bankruptcy so they can try to pay your debts. A bankrupt person can also not be a director of a company for at least 3 years, and may have significant difficulty obtaining finance to secure new borrowings in the future.
If there is any possibility of trying to resolve your family law matter without bankruptcy, that is worth exploring in almost all circumstances.
If you would like to discuss your options with respect to bankruptcy and how it may impact on your family law property settlement, please contact our office on 4928 7300.