Bankruptcy and family financial remedy proceedings

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The impact bankruptcy and divorce proceedings have on one another has been subject to a number of cases in both the bankruptcy and family courts. Unfortunately, it is not uncommon for bankruptcy proceedings to be in existence while divorce proceedings are ongoing and concurrent proceedings can create conflict when it comes to the division of assets and the knock-on effect for the divorce proceedings.

In addition, there are instances of bankruptcy proceedings being commenced with the dominant intention of frustrating the divorce proceedings. The three main issues for bankruptcy proceedings and the effect they can have on financial remedy (formerly ancillary relief) applications are:

  1. •

    what is the general position of each court when there are concurrent bankruptcy and divorce proceedings?

  2. •

    what powers does the court have to set aside bankruptcy proceedings if they were commenced to defeat the divorce proceedings?

  3. •

    can the bankruptcy court unwind financial remedy orders (including property adjustment orders)?

The general position of each court when there are concurrent bankruptcy and divorce proceedings

If a bankruptcy petition is presented, or a bankruptcy order is made, before the family

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Restructuring & Insolvency analysis: The Court of Appeal has confirmed that the authority to bind a firm for the purposes of its winding up (conferred on partners after the dissolution of a partnership by section 38 of the Partnership Act 1890 (PA 1890)) applies to pursuing causes of action which accrued prior to dissolution. Whether PA 1890, s 38 will permit partners of a dissolved partnership to pursue litigation post-dissolution is a fact sensitive question. The question is whether such litigation is reasonably required in all the circumstances to wind up the affairs of the partnership. Relevant considerations are not circumscribed and will include considerations of prospects of success and cost-effectiveness. In Flohr, the Court of Appeal confirmed a general partner of a limited partnership governed by the Limited Partnership Act 1907 (LPA 1907) was empowered to sue a third party on behalf of the partnership notwithstanding the dissolution and winding up of the partnership. This was so even though the relevant cause of action arose prior to dissolution. Written by James Fagan, Barrister, at Radcliffe Chambers.

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