HMRC Bankruptcy and ExH

[CrisisMummy]

Posting here, also in "Chat" for traffic. Am going to try and see a Solicitor first thing.

I picked-up an email an hour ago from my ExH saying HMRC are shortly to make him bankrupt and they will come after "his" half of our house. We are divorced but do not have a financial settlement. I have been paying the mortgage since he defaulted 18 months ago (it is all very tight but cheaper then renting the same sized property) and live in the former marital home with four Children, oldest 12, youngest 5. I have been Googling, but have no answers: am I likely to lose my house?

Possibly not. It all depends on what the bankruptcy trustee decides. The trustee is appointed to look at the bankrupt person's assets and decide what can be sole to recoup the owed money. He'd look at the house ( or your Ex's half of it ) and decided (1) what equity is held in it, and (2) what you'd get for it if sold. Keeping in mind that if the house was sold, the bank would be paid out first, then the trustee could only take his half of the profits, it often isn't worth selling the place.

My son is currently bankrupt - he was in a similar position where his ex still lives in the house. The trustee decided that it wasn't a useful thing to sell the place, considering that he'd only recoup a small amount from a possible sale. So the ex still lives there, and my son's half of the house will revert to her when the bankruptcy ends next month. So she'll end up better off, since she'll own all of the house instead of half of it.

You'd be well advised to contact your ex's trustee and ask lots of questions. There is no guarantee that the house will be sold, so don't panic. Good luck.

Even HMRC? I believe they are very strict. Are they not paid first?

And, will HMRC talk to me, as the debt is against him?

The moneysavingexpert website has useful information on bankruptcy. Is there much equity in it? If not, you will probably have the option to buy him out for a nominal sum. But how do you not have a financial settlement when you are divorced with young children? I would get that sorted if you can.

Buy out the trustee. Don’t think it will revert to your ex when the bankruptcy ends. It won’t.

Yes talk to the trustee. Possibly as your ex may be unable to pay spousal maintenance to you and you are housing the children more than a 50% split of equity would be fair on a divorce so you might get 70% or even 100%. There have been divorce cases I believe where all the quity was given to the spouse to avoid creditors and that been over turned sometimes so I do not think it is definite his half is entirely safe.

It sounds from this as if this may apply
"Settlement Order [ the order made when your divorce finances are approved by the court] made after a Bankruptcy Order granted - in these circumstances, a spouse’s claim will be limited to those assets which have not been transferred to the Trustee in Bankruptcy and matters are dealt with by the bankruptcy court rather than the family court".

www.clarionsolicitors.com/blog/bankruptcy-and-divorce-timing-is-everything

Actually if you can both rush in and see a solicitor with an agreed consent order eg giving you 70% or 80% of net assets as a clean break for example and get that before a judge really quickly for approval it might be better.
"Matrimonial Court Order made after a petition for spouse’s bankruptcy is filed but before Bankruptcy Order is made – this is not ideal, as the matrimonial Judge approving the Order containing the division of matrimonial assets is restricted to approving an arrangement which meets the needs of the solvent spouse. Therefore, careful specialist drafting is required."

Sorry actually the first option may also be possible for you if you rush it too which seems the best position of the 3:
"Matrimonial Court Order made before petition for bankruptcy is filed - generally any settlement reached before a petition is filed will be protected from challenge by a Trustee in Bankruptcy. The only circumstances which have undermined this general rule is when it is apparent that spouses have conspired to act to the detriment of creditors when agreeing a settlement, and in these cases a Court may be willing to set an order aside. Unless set aside by a court, lump sums and periodical payments secured by a court order will be safe if entered into at this stage of the bankruptcy process. The benefits of this are two-fold. Firstly, it protects the matrimonial assets which are to be received by the solvent spouse from a claim by the potential bankrupt’s creditors. Secondly, bankruptcy does not undermine a matrimonial settlement. Therefore, the solvent spouse’s entitlement pursuant to the matrimonial finance order cannot be overwritten or discharged by bankruptcy."

Thank-you.

I agree with Xenia. You need some specialist advice here. We recently got an order through in the face of imminent bankruptcy. It’s important to go about things properly but if done right it should stick.

And I was wondering if this thread could be used by the trustee to argue the financial order on divorce was simply to ensure creditors are paid less - which I suppose in this case is people like I am - tax payers who pay more tax than we should when tax payers go bankrupt without paying HMRC.

There is nothing wrong or improper in a spouse getting in there first before other potential creditors. It happens all the time with creditors getting charging orders. Transparency is the key.

I have had an initial consultation with a Lawyer, and another appt. booked for next week. Xenia, it seems to be that bring made bankrupt by HMRC is more stringent that other forms: my ExH's problem is his unpaid tax; mine is trying to provide for my Children, especially as, even though I work FT, my budget is very tight. I do not wish HMRC to be done out of what they are due, but, equally, I want to ensure my Children are protected and provided for.

Yes of course. Do see what the lawyer says next week. Whether your husband goes bankrupt or not you and he will need to agree a financial agreement or settlement anyway so best to get on with it ands the lawyer can look at what you each earn, all the assets and debts you both have, what pensions you have, what the children cost to keep and that kind of thing.

I think they normally only go for possession and sake if his equity is 15k or more.