Bankruptcy and family law
WA’S unemployment figure has risen sharply this year, from 5.3 per cent to 6 per cent.
One of most critically affected sectors is mining; over the last year, 25,000 jobs were lost across the resources sector in Western Australia alone.
Many families affected by unemployment are struggling to meet their financial commitments and the impact of this upon their relationships, marriages and children can be significant. As a result, we may well see an increase in relationship breakdown, bankruptcy and parties finding themselves in the Family Court.
Family law generally requires the debts of a couple to be paid from their property or assets when the relationship breaks down. However, the bankruptcy of one member of the couple changes how debts are treated.
If you are the bankrupt spouse, all of your property (with some exceptions) is placed into the hands of the Trustee in bankruptcy. You will be allowed to keep certain assets such as necessary household goods, superannuation, tools of trade to earn income (up to a value of $3650) and a car (up to a value of $7500).
The Family Court may allow the Trustee in bankruptcy to be added or joined to your family law proceedings if they are satisfied that the interests of your creditors may be affected by your family law proceedings. Once the Trustee is joined as a party to your family law proceedings, he or she steps into the shoes of the bankrupt spouse.
The bankrupt spouse will therefore lose their right to make submissions to the Court regarding the assets and property that has vested in the bankruptcy Trustee.
If you are the non-bankrupt spouse, you need to be aware of the Bankruptcy and Family Law Legislation Amendment Act (BFLAA). The BFLAA gives the Family Court the power to make orders about property that has vested in a Trustee in bankruptcy. The Family Court will balance your claims to matrimonial property against the competing interests of the creditors.