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Family Home - Fight for it has entered whole new era |
Recent legal decisions, along with reforms of bankruptcy and family law, mean that spouses of bankrupts will have to at least consider whether they need to call on the powers of the Family Court to protect their share of the family home. |
Through a recent case, the courts have rewritten the law on bankruptcy for the modern age. |
Through a recent case, the courts have rewritten the law on bankruptcy for the modern age. |
Mrs X bought a property in the '70s with her husband for $31,000. In 1987 Mr X's half-share was transferred to his wife. In 2000 he became a bankrupt. |
Eventually, Mrs X was ordered to transfer her husband's halfshare back to the trustees in bankruptcy, in accordance with the Bankruptcy Act. Mrs X argued that because she had contributed 76.3 per cent of the purchase price of the property, she should only have to remit the remaining 23.7 per cent to the trustees. |
Courts had previously presumed that parties who contributed unequal shares of the purchase price of a property would hold the property in those same shares. In the recent case, the court said: "It may be inferred that it was intended that each of the spouses should have a one-half interest in the property, regardless of the amounts contributed by them". |
Consider the case of someone who put property in their partner's name some decades before because their occupation put them at more risk. Assume that several decades later the person becomes bankrupt as a result of recent significant gambling losses. |
Under the Bankruptcy Act, the bankruptcy trustee had no claim against the property. Payments towards the purchase and the mortgage were not made with intent to defeat creditors. The payments were not an undervalued transaction, as the bankrupt was solvent at the time the mortgage payments were made, and in any event they are well outside the statutory time limits. Even under the most recent reforms to the Bankruptcy Act, the trustee would be limited to a potential claim in respect of amounts paid during the past four years. |
Nevertheless, a bankrupt's wife will now be presumed to hold the whole of the matrimonial property in trust for herself and her husband with each having an equal share. The trustee in bankruptcy will be able to recover one half of the value of the matrimonial property which may, over the decades, have risen to a considerable sum. |
