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Bankruptcy and family law

1 October 2020

With COVID-19, financial pressures are increasing. When financial pressures are serious that can sometimes lead to bankruptcy. Declaring bankruptcy is a major financial step to take but what impact can it have in a divorce?

What is bankruptcy?

When a person is declared bankrupt, their assets are immediately put under the control of a Trustee. This means the bankrupt person does not have any control or possession of their assets and can no longer transfer property.

In Family Court proceedings

A person who is bankrupt, or becomes bankrupt, and is a party to Family Court proceedings must notify the court at the start of the proceedings or as soon as they become bankrupt.

A bankrupt person is not entitled to make submissions to the court in relation to property that is currently being looked after by the Trustee, but they do have a right to make submissions in relation to property owned by their non-bankrupt spouse.

Where there is one party to a property settlement who is bankrupt and the other party is not, the non-bankrupt person may make an application to the Family Court for an injunction.

The purpose of the injunction is to stop the Trustee from distributing any assets or property amongst the bankrupt party’s creditors before the property settlement matter is resolved.

The court can order that property, otherwise available for distribution to creditors, be transferred to the non-bankrupt spouse.

Types of debts:

In cases of bankruptcy, it’s important to note the difference between secured and unsecured liabilities.

Secured liabilities are “secured” by a tangible asset such as a house or car – the asset serves as collateral for the debt. Lenders have a right to seize the asset to cover the debt. A mortgage and car loan are the most common examples of secured debt.

With unsecured liabilities, lenders do not have the rights to any collateral for the debt. If you fall behind on your payments, they generally cannot claim your assets for the debt. Credit card debt is the most widely held unsecured liability.

What about child support?

Even when a person has been declared bankrupt, child support or spousal maintenance orders can be made against them.

A person who is bankrupt is not released from all provable debts – they’re still liable, for example, for debts incurred by fraud such as Centrelink debts and debts incurred under a maintenance order or child support assessment.

In fact, when an order is made for child support or spousal or child maintenance, the payments are taken to the debts of the bankrupt party. The non-bankrupt person can then choose to enforce those debts via court proceedings. The funds can be recovered either by voluntary payments, by deductions from the bankrupt person’s wages or by intercepting and applying taxation refunds.

Bankruptcy proceedings and how it affects family law settlements can be a complicated matter. This is definitely one area where you need specialist family law advice. Please contact our office and we can discuss your needs at an individual level. To make an appointment, please phone us on (07) 3221 4300 or email at [email protected], or alternatively fill in our online form here.

Bankruptcy and family law. Accompanying picture: a woman uses laptop in kitchen at home
2020-09-23T14:21:12+10:00

Client Testimonials

Your team’s communication with me was exceptional, I knew exactly what was happening.
A.A., Eatons Hill
The professionalism and reliability delivered by Amy Honan was fantastic. I had an urgent matter around my property sale and Amy offered to provide assistance over a weekend if I required it – that’s above and beyond!
E.F., Nundah
So pleased to have had a good, sound and knowledgeable firm.
C.W., Brookfield
I really liked the personable service by Michael, the simple plain language he adopts and his patience.
A.O., Kedron
Amy, thanks very much to you and your team. Throughout my dealings with MLFL I have been continually impressed with your level of professionalism and, in particular, your understanding of circumstances and the articulate way you conduct yourself. I was completely satisfied with today’s outcome and without your experience and expertise in family law I doubt that the result would have been achieved.
M.R., West End
I always felt that the service provided by Michael Lynch Family Lawyers was of a high standard. Each time, after appointments I came away feeling secure. Keep doing what you are and maintain the ‘family feel’ that permeates your services.
C.W., Brookfield
Amy’s work was extremely professional but above all she has a manner and wisdom in dealing with people under stress. I will be recommending your firm to anyone that requires assistance.
K.H., Augustine Heights
Michael Lynch Family Lawyers always gave me competent and knowledgeable advice. I was consistently kept up to date. The meetings and phone calls were kept business-like, yet caring and thoughtful of my emotional state at the time. Thank you.
J.S., Holland Park
Your newsletters are great, I appreciate them.
K.B., Carina
I liked my solicitor keeping things as simple as possible.
S.M., Clayfield
My lawyer acted with professionalism in all her dealings with me and with the lawyer on the other side. I was always kept in the loop. I liked her approach. Thanks.
D.S., Coorparoo
Michael Lynch Family Lawyers have really listened to me. I felt confident my case was handled well. The law has changed recently, and I did not feel that a previous law practice I spoke to was suitably up-to-date.
P.B., Carindale
Michael is a good listener. My documentation maintained the high moral ground.
S.S., Hamilton
Thank you for providing me with a professional yet empathetic approach to gain the best outcome for me. My solicitor was excellent in explaining the processes and in representing me in Court. You have great customer service!
T.V., Everton Park
I appreciate you being upfront with fee estimates. You also have a fantastic website and the seminars REALLY helped to get me focussed.
T.C., Tarragindi
You guys provide extraordinary service.
A.O., North Brisbane
I was impressed by my solicitor’s attention to detail and her concern for me, and that the process was explained to me and that I understood it at all times.
B.W., Chapel Hill
The staff at Michael Lynch Family Lawyers were great. Everyone was fantastic, professional, understanding, caring and always communicated with me. I knew I was in good hands.
A.A., Eatons Hill
I appreciate my lawyer’s professional approach and her being on top of my situation.
N.S., Mt Gravatt
Amy, thank you. You have been diligent, accurate and pro-active for the entire duration of my matter. I appreciate it.
R.P., Cleveland
Michael knew what he was talking about.
R.M., Warwick
I really appreciated the happiness of your secretarial staff.
G.C., Clayfield
Thank you, you placed my needs first, you were aware of the need to reach a final result and not get caught up in the personal issues of the other party.
S.L., Moranbah
I like your friendly service and the ability to speak to my solicitor directly.
R.G., Wishart
Your team is professional, warm, friendly and real.
N.R., Crows Nest
I was also always confident that I was getting the very best advice.
T.S., Flinders
May I take this opportunity to express my gratitude to you and your staff for the excellent professional services I received. In a word, priceless.
D.H., Hendra
Michael Lynch Family Lawyers are easy to deal with and their systems are good.
D.T., Ferny Grove
I was very impressed with the first initial interview. Everything was well explained and the advice was honest about what I should expect.
C.M., Morningside
Your staff is knowledgeable, professional and very calm.
A.C., Helensvale
My family lawyer was very helpful in assisting me to combat a very ugly situation without stooping to the low levels that the other solicitor attempted to take us.
M.J., Manly
If I need a family lawyer in the future I’ll be heading to Michael Lynch Family Lawyers again.
C.W., Brookfield
I’m very glad Michael is my lawyer and not the other side’s solicitor.
S.S., Hamilton
Thank you, you kept me sane in a difficult situation and gave me the encouragement and the confidence to keep going. You made me feel extremely comfortable.
A.M., Chambers Flat
At Michael Lynch Family Lawyers I got professional and no nonsense advice, costs were within quoted amounts and my matter was resolved quickly – well done!
L.R., Ascot
Many thanks for your assistance – life is now great – I’m moving on.
J.K., Mansfield
My solicitor provided a personalised service, prompt and quick responses and cost information prior to my commitment.
G.C., Southport
I like that my lawyer treated me like a friend and kept jargon to a minimum. She was easy to contact and kept me informed.
L.R., Samford
Thank you for your ongoing conciliatory approach in this matter and as always I appreciate your level headed advice. I certainly feel that I ended up with the right Solicitor.
S.C., Nundah
A personalised and professional service. Information has been clear and provided timely to assist my decision-making.
S.S., Hamilton
Lovely to deal with and provides a balanced view in what are very difficult circumstances.
A.C., Morningside
Thank you for the outstanding legal advice you have provided and professionalism in which you conduct yourself. I am truly thankful that it was you who represented me.
M.T., Stafford
Michael is very personable and very good at covering the material and explaining the strategy.
J.O., Hawthorne
Michael was the most knowledgeable of all lawyers I spoke to when looking for a lawyer. He showed professionalism.
R.R., Brighton
Thank you for being very personable, professional and always providing me with the most appropriate advice in my times of difficulty. The other party’s lawyers were extremely aggressive, while Michael Lynch Family Lawyers remained calm and professional.
S.D., Parkinson
Amy, thank you for all that you have done during this matter. You impressed me with your professionalism from our initial meeting, and you have proven beyond doubt, to have had the skills and knowledge required. You are a credit to the company, and I would highly recommend you to anyone in a similar situation.
R.P., Cleveland
Thank you for the great newsletter. Your article on “Coping with Christmas” is brilliant – clear, caring and helpful. Thanks again!
C.T., Bribie Island

I have appreciated the way that you and the staff at your firm have handled my situation. I would especially like to mention the professional and caring way my lawyer conducted my case, I am deeply grateful and extremely happy with the results. I will be referring others to your service.

J.H., Wellington Point

Thank you for helping me through this difficult time. You have been caring, compassionate and efficient. Some of my divorcing friends have not been so fortunate. In my mind you are the best family lawyer in Brisbane. If anyone I know needs a good family lawyer, I will tell them to speak to you. Thanks again.

B.T., Clayfield
I was guided through a really difficult time with expertise of Michael Lynch Family Lawyers. I am more than happy with the outcome of mediation.
J.H., Windaroo
Michael, thank you again for your presence here yesterday. We really appreciated the clarity and accessibility of your presentation. It is a rare thing to find somebody who not only has expertise, but also has a skill in communicating it.
J.S., Brisbane

I just wanted to get in touch to say thanks for helping me get through my custody and settlement. Thanks again to you and your staff. You have had a significant positive impact in my kids’ lives!

B.S., Brisbane

Thank you Debra and Helen for all the work you did for me, you both made the process manageable and brought sense to the chaos.

R.B., Toowong

I would like to thank your company Miss Brown for the support and compassion shown while dealing with my matter.

C.M., Brisbane

Thank you very much to everyone at Michael Lynch Family Lawyers. Thank you for helping me get my life back and make a fresh start. To have that fresh start without fear and anxiety is priceless.

A.A., Perth, Your Content Goes Here

“Many thanks to Stephanie for her help and support through this time, I was incredibly impressed with her work.” 

L. K., North Lakes, Your Content Goes Here