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    Family Law: The B Word: Bankruptcy

    29/09/16 9:50 AM

    It is the word no one wants to hear – bankruptcy. With economic security being a priority in the present day, bankruptcy is the worst case scenario few expect. However, the implications of bankruptcy influence multiple areas of law, including Family Law property settlements.

    But before we get to the problem with bankruptcy, let’s set the scene: You and your partner separated eight months ago. You now feel it is time to reach a property settlement and finalise the economic relationship between you so you can move on with your life. It is all running smoothly until you complete disclosure and realise you have a problem; your ex-partner doesn’t have any assets left. They are bankrupt.

    The problem:

    In this situation, the unfortunate truth is that you may not recover the portion of the property pool which is owed to you.

    In the immediate future, the fact of the matter is that your ex-partner has no money. Even if negotiations yield and agreement of a 60/40 split in your favour, for example, the split cannot be executed if there are no remaining assets to draw upon. In the long term, you will be trying to chase money alongside all your ex-partner’s creditors. Amendments to the law in 2005 allowed creditors to be joined as parties to matters in the Family Law Court in certain situations.

    Now, it is possible that you will be able to receive your portion of what is owed to you in time. However, in the case of bankruptcy, deciding whether to pursue your case in Family Law is often a matter of cost-benefit analysis; you may receive a property settlement in time but you will also need to spend a lot of time, money and emotional energy in maintaining your pursuit throughout the court system.

    A caveat to this is that bankruptcy turns already complex family law into a quagmire of legal claims. There are many financial implications you need to consider if you are in this position. As such, we strongly recommend that you seek advice in relation to YOUR particular circumstance to evaluate the benefits of pursuing legal action in the Family Law Court after your settlement.

    If you have a family law matter, concerns about your finances in light of a family law property settlement questions about family law and separation in NSW and want to find out more please do not hesitate to contact us on 9688 6023 or email us at

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     This article is provided to the reader for general information. It is not legal advice. It was written by Andrea Spencer & Emily Graham and edited by James Frank.

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