When it’s a struggle to make ends meet, it’s understandable that tempers become a little frayed. Not knowing whether they can afford to pay for the bare essentials like bread and milk, let alone something a little more frivolous like Christmas presents for the kids could lead to heated arguments about who’s responsible for the family’s precarious financial predicament.
In extreme cases, arguments among family members about finances could have disastrous consequences, often leading to breakdown and, in the case of married couples, divorce. In the event of divorce, if one spouse is worse off than the other and is forced to consider declaring bankruptcy, then it could have a serious impact on valuable matrimonial assets such as the family home.
If one recent divorcee does declare bankruptcy, then most, if not all of their assets will fall into the hands of a Trustee in Bankruptcy, a third party who looks after the interests of the creditors seeking to get as much back in the form of debt repayments as possible. As for mutually-owned assets such as the family home, things aren’t quite as simple as they may appear to be.
The reason for that is any matrimonially-owned assets that are in the name of both divorcees are also handled by the Trustee. This means that, for the non-bankrupt divorcee, their assets, including their half of the home, become worth a little bit less. The worst-case scenario for both is that creditors seize the family home, leaving the family homeless.
The non-bankrupt spouse is only able to get control of their half of the family home if the Trustee gives them their consent. The same applies to other major assets, which may include the family car, electrical appliances and large items of furniture. Some smaller items may be immune from being taken by creditors, depending on their value.
Non-homeowners not safe
Families who don’t have their own home are more likely to declare bankruptcy. 77% of people who file for bankruptcy are non-homeowners, which can be attributed to typically having lower income, fewer assets with which they can pay back any large-scale debts and spending a greater proportion of what they earn on things such as monthly rental payments.
For non-home owning families, the process of declaring bankruptcy is a little simpler, as there’s nothing quite as big as the family home to fight over. However, the process as a whole is the same while quite a lot of patience is needed to make it easier for everyone involved from the Trustee to the bankrupt spouse. It’s advisable to sort as much out as possible before the bankruptcy process begins.