When dealing with insolvency and bankruptcy in family law matters, the court has extensive powers.
Here’s a general breakdown:
The court considers creditors' positions and certain liabilities might be excluded if they are uncertain, unreasonable, or unlikely to be enforced.
The Family Law Act allows the court to make declarations about the existing rights of parties against third parties.
Orders can be made if claims arise from common transactions or facts, are related to other claims, or could result in conflicting findings if tried separately.
Third parties involved in matrimonial disputes are included in proceedings to avoid duplication of evidence, issues, time, and costs.
The court's power can override conflicting provisions in trust deeds or other instruments.
The court can grant injunctions affecting third parties. Injunctions can preserve assets, prevent third parties from dealing with property, or restrain legal proceedings against a party to a marriage.
Bankruptcy
When a party becomes bankrupt, their divisible property vests to the trustee in bankruptcy
for creditors' benefit. Non-divisible property includes superannuation interests.
However, the Family Law Act allows the court to make orders regarding the property of a bankrupt partner that has vested in the trustee. The court can adjust the property distribution between the non-bankrupt spouse and creditors, potentially reducing assets available to creditors. The trustee in bankruptcy can be a party to family law proceedings, and the court can consider the needs of the nonbankrupt spouse and children. Trustees can also seek to increase the asset pool available to creditors using equitable principles like resulting or constructive trusts.
Insolvency
To effectively manage family law cases involving bankruptcy, and corporate insolvency, there will often need to be consideration of insolvency laws and practices (personal and corporate), engagement of barristers or specialised experts to assist, and detailed information about business structures, including companies, partnerships, and trusts. Often, there will need to be an understanding about the entity’s roles and compliance, financial statements and solvency matters, duties under the corporations’ act and various other responsibilities of the individuals in a family law dispute.
Dealing with family law financial proceedings involving third parties, competing claims, or
bankruptcy requires a comprehensive understanding of various legal aspects. Given the unique nature of each case, it’s important to seek legal advice tailored to your scenario. If you have any questions, please feel free to reach out!
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