The Court of Appeal has ruled that the financial settlement between a man and his ex-wife could not be used to pay the husband’s debts after he became bankrupt two years after their divorce.

The claim by the man’s receiver in bankruptcy that the arrangements under which the wife retained the family home constituted a ‘transfer at an undervalue’ was not accepted by the Court. The decision will be welcomed by those who are divorced and whose ex-spouses have become insolvent. Had the receiver’s argument carried the day, the ex-spouse of a bankrupt would not have known for certain that assets derived from the financial settlement would be safe from a future claim.

However, the relief may be short lived. An appeal to the House of Lords is said to be likely.

Partner Note

Hill and another v Haines, COA 5 December 2007.

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