News: Bankruptcy should annul matrimonial debts, claims former boss

Divorce|Family Law|News|October 23rd 2012

A one-time company boss has brought a test case claiming that his now discharged bankruptcy should free him from the obligation to settle a matrimonial debt to his ex-wife.

When Alexander McRoberts, now 54, separated from his wife Mandy in 2003, she was granted their former home, and he also agreed to give her a lump sum in excess of £500,000 payable in instalments. At the time his company was highly successful, generating a multi-million pound turnover.

However, three years later Mr McRoberts went bankrupt, by which point he had paid his former wife only £211,000. The following year his bankruptcy was discharged and he became the CEO of a baggage handling firm. However, that company has now also come to an end.

His wife, who is now the director of a car hire firm, is now pursuing Mr McRoberts for the outstanding £394,000. She was a creditor in Mr McRoberts’ bankruptcy. He is now asking the court to rule that his financial obligations to his ex-wife did not survive that bankruptcy.

Barrister Simon Calhaem told the Hon Mr Justice Hildyard that Mr McRoberts had no prospect of paying off the outstanding sum “now or in the foreseeable future”.

He acknowledged that the case raised a “novel point” and added: “Mrs McRoberts’ financial circumstances, as is clear, are far more comfortable than her ex-husband’s.”
Mr McRoberts fears that he may be driven into a second bankruptcy if he is forced to settle the debt to his ex-wife.

Speaking for the wife, however, barrister Byron James said a ruling in the husband’s favour could be open to exploitation in future divorce proceedings.

Mr Justice Hildyard said: “I don’t want to do anything that suggests that so long as you go into bankruptcy that is the gateway to avoiding the family court’s orders….The default position is that, although the bankrupt gets a new start in life, he still has round his neck orders made in family proceedings for lump sums and costs.”

But he added: “If the ongoing order was made as a crystal ball assessment of the parties’ needs, it may well be that the bankruptcy court can take those changing needs into account.”

The case “raised some curiosity as to the relationship between the bankruptcy jurisdiction and the family jurisdiction” and needs “some further reflection”.

The judge reserved his decision until a later date.

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  1. Rachel says:

    With regard to changing circumstances, after a court order made in a divorce case, what would happen if a spousal maintenance order is made for the wife who is 53 until she is 60, at which point a shared pension order comes into effect? The husband then argues that she can take the pension at 55 because that is what he has decided to do? She would prefer to continue to work until she is 60 and continue to receive the maintenance as per the order of the court ( which tops up her income to meet her needs). In other words, can respondents deliberately thwart the court orders by changing their circumstances to defeat the order? If I am forced to draw on my pension at 55 instead of 60 it will be considerably less.

  2. tattoo artist says:

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  3. Andrew says:

    The law needs changing to make it crystal clear that lump-sum orders are debts, provable in and discharged by bankruptcy.
    They should also rank behind other debts, being effectively debts between partners which always rank behind debts due to outsiders.

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