Bankruptcy will significantly affect division of matrimonial assets

by | Jun 20, 2016 | Knowledge & Insights

If your spouse is bankrupt, this can significantly affect how your matrimonial assets are divided.

The High Court provided an explanation of how bankruptcy can potentially have a significant effect on the division of matrimonial assets in the case of AVM v AWH [2015] SGHC 194.

These are the brief facts of that case:

  • The wife and husband were married in 1996 and divorced in 2015
  • They disputed over the division of matrimonial assets
  • The High Court initially dealt with the ancillary matters (namely, division of the matrimonial assets and maintenance for the wife and for the parties’ triplets) as follows:
    • The matrimonial assets were divided by awarding 60% to the wife and 40% to the husband
    • The wife would receive no maintenance for herself but will be given liberty (i.e. permission) to apply in the future if her circumstances change
    • The husband will pay lump sum maintenance to the wife for the triplets in the region of $325,000 (and this amount will be paid from the husband’s share of matrimonial assets
    • The husband will have only supervised access to the triplets limited to two hours a week
  • The husband filed an appeal against the High Court’s earlier decision

The Court decided not to award any maintenance to the wife based on the following factors:

  • The husband had no capacity to pay maintenance because he was unemployed and an undischarged bankrupt.
  • The wife was a resourceful businesswoman and capable of being financially independent both during and after the marriage
  • Although the wife argued that the husband was trying to his status as unemployed and bankrupt to avoid having to paying maintenance to the wife and children, the Court found that there was no evidence to substantiate this

The High Court provided a number of useful explanations and observations:

  • A spouse’s bankruptcy can potentially have a significant effect on the division of matrimonial assets
  • Once a spouse has been made bankrupt, monies that are transferred away from the bankrupt spouse through the divided matrimonial assets will result in less monies being available to pay the bankrupt spouse’s creditors.
  • Creditors’ interests may not inevitably or automatically be subordinated to the non-bankrupt spouse’s interest and the Bankruptcy Act provides for the rights of creditors to be prioritised over the rights of a non-bankrupt spouse in a number of situations.
  • In fact, it is arguable that creditors’ rights should usually prevail over the non-bankrupt spouse’s rights unless there are exceptional circumstances,
  • Generally, it may not be appropriate for a Court dealing with ancillary matters in a divorce to make orders which may jeopardise the rights of creditors in a bankruptcy
  • However, a Court may safely make such orders without jeopardising the creditors’ interests if the bankrupt spouse’s share of the divided matrimonial assets is enough to both repay all of his creditors in full as well as repay all his financial obligations towards the wife under the divorce
  • In this way, the husband’s bankruptcy may not prevent the Court from still dividing the matrimonial assets in a just and equitable manner

More information on the case may be found in the Grounds of Decision here.

About the author

About the author

Jonathan Wong

Jonathan is the Founder and Managing Director of Tembusu Law. He is also the founder of LawGuide Singapore, a prominent legaltech startup which successfully created and launched Singapore’s first legal chatbot in 2017.