The Court can deal with the bankruptcy of a party involved in certain family law proceedings. When a party to a marriage or de facto relationship becomes bankrupt, his or her property (except some categories of assets such as most household goods and superannuation) is immediately ‘vested in’ (held by) the trustee of bankruptcy. Once this has occurred, the bankrupt spouse is no longer able to transfer any property or pursue a property settlement. Only the trustee can do that.

The trustee of the bankrupt spouse may apply to become a party to family law proceedings to which the bankrupt spouse is a party. When deciding what orders to make, the Court must determine the competing rights of the creditors and the non-bankrupt spouse. Neither the non-bankrupt spouse nor the creditors have priority over each other. Ultimately, the Court can order the trustee of the bankrupt to transfer property, formerly held by the bankrupt spouse to the non-bankrupt spouse.

Cases of this nature can be highly complex and require the attention of a family law expert. At Vic Rajah Family Lawyers we maintain the necessary expertise to guide you through this process.