Losing The Family Home

Rachel Small — Thu, 15 Nov 2007 14:30:00 -0500

Wendy Haines, a British divorcee, was awarded the marital home in her February 2006 divorce. Unfortunately her ex-husband David filed for bankruptcy and in December, the trustee made claim to 50 percent of the interest in the house. It looks like Wendy is going to lose half of the house already awarded to her by the court.

The challenge was based on the presumption that David fraudulently disposed of assets in order to defeat his creditors. Although this was likely not the case, the Appeals court ordered Wendy to turn over half of the funds from the sale of the house, which was sold to pay for the current litigation.

The trial court, in awarding Wendy the house, noted that the Haines family had an extravagant life style in buying the home, farm, horses, cars and living beyond their means. Wendy has appealed to the High Court of Appeals.

If this decision is allowed to stand, bankruptcy trustees will have a field day overturning final divorce decisions in which the debtor's property has been transferred to the former spouse within a potential timeframe of up to five years.

This common law is also followed in the US. Trustees can set aside property settlement orders of divorce courts where a spouse has incurred substantial debt. Often, disgruntled exes will go off on spending sprees to deliberately defeat the division of matrimonial property. In the US, property transfers made within one year of the bankruptcy filing can be recovered by trustees. Any property transferred for less than assumed fair value may be challenged for up to six years.

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Losing The Family Home