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Friday, 26 October 2012

Could bankruptcy get you out of paying maintenance following a divorce?

A case is going through the courts at the moment, where a former company boss, who has been declared bankrupt, is arguing that he should have his debts to his ex-wife wiped out too. His divorce settlement gave her the family home, and £500,000 in installments. So far she has received £211,000, and he says that should be enough.

If he wins, it could have far-reaching effects.

Alexander McRoberts, aged 54, of Datchet in Berkshire was divorced in 2003. He fell into financial difficulties shortly afterwards and was declared bankrupt in 2006. This was discharged in 2007, but Mr McRoberts is arguing that the bankruptcy should have cleared the debt.

His lawyer has pointed out that he is not in a financial position to repay the debt. And that his ex-wife, Mandy McRoberts, is a company director in a £500,000 home in Windsor, which makes her considerably more financially comfortable than her husband. He also says that if the debt still stands, Mr McRoberts is concerned that he will have to declare himself bankrupt again.

Mrs McRoberts has argued that £349,000 is still outstanding from their divorce settlement nine years ago. Her lawyer has highlighted that if the court finds in favour of Mr McRoberts, it will create a legal loophole, which would enable spouses to dodge their responsibilities through bankruptcy. He said it would mean "opening the door to all the bankrupts out there who don't want to pay their lumps sums in family proceedings."

The impact
The judge 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. There are lots and lots of husbands and wives who are company directors."

However, he added that there may be an argument that the bankruptcy court could take the changing needs of both parties into account - and that the case "raised some curiosity as to the relationship between the bankruptcy jurisdiction and the family jurisdiction."

He added that the case needs further consideration, and the decision has been reserved for a later date.

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