Introduction

A regional firm of solicitors referred one of their clients with complex financial affairs.

Their client solely owned the matrimonial home which his wife and their four children occupied afer their acrimonious marital split. The wise was resistant to the debtor selling the property which had significant equity which could have allowed him to pay his creditors in full with a considerable surplus to be returned to the debtor.

Background

• Ex-wife occupied the property.
• Covid-19 Pandemic.
• Matrimonial Home Rights Notices prevented a sale of the property.
• Debtor petitioned for his own bankruptcy.

The solution

The situation faced by the debtor was that he was asset rich and cash poor with no ability to realise his main asset to settle his creditors – but if you cannot pay your creditors as they fall due then in the eyes of the law you are insolvent. We provided a practical solution and advice to settle his creditors in the most efficient manner possible given the marital breakdown.

Summary

At the commencement of the bankruptcy the property was valued at £690k subject to a mortgage of £104k. Shortly after our appointment we instructed local agents to inspect and value the property. This was initially delayed due to Covid-19 restrictions but eventually the property was inspected and valued at c.£750k.

Three months after our appointment we became aware that the debtor’s wife had made an application under Section 232 of the Insolvency Act 1986 for the annulment of the debtor’s bankruptcy on the grounds that it ought not to have been made. We instructed the referring solicitors to act on our behalf. Based on the financial information from our investigations the solicitor could demonstrate the debtor was insolvent when his Bankruptcy Order was made and her application was unlikely to succeed. Following further discussions with the wife, her solicitors agreed to withdraw the annulment application and proceed with the realisation of the property.

We then experienced considerable delays in getting the property marketed due to Covid-19 restrictions as well as further correspondence with the wife’s solicitors regarding the prospect of a discretionary payment fund to relocate herself and her children following an eventual sale of the property in exchange for volunteering vacant possession and avoiding the need for possession proceedings in court.

Given that the costs and delay of possession proceedings were likely to run into several tens of thousands of pounds we offered a one-off discretionary payment of £20k representing one year’s rent to be paid from the sale proceeds upon completion. Upon acceptance of the offer my agents listed the property on the market at an intial asking price of £750k. The property attracted significant interest following its listing however despite numerous viewings no formal offers were received. We reduced the asking price and secured an offer of £680k.

Upon acceptance of the offer we liaised with the wife’s solicitors to ensure vacant possession was achieved prior the exchange of contracts. The wife however required early payment of £20k to be in a position to provide vacant possession. We paid this from our firm’s business account to be repaid out of the sale proceeds, literally putting our money where our mouth is. In return the wife provided vacant possession within 28 days and removed a Matrimonial Home Rights Notice which was registered against the property’s title.

We sold the property for £680k and in the end the surplus eventually ended up with the wife’s solicitors as part of the Family Court proceedings.

The result

All in all a good case as the solicitors got paid well for assisting us and creditors, including the debtor’s parents as the largest creditor, got paid in full plus statutory interest and a surplus was paid to the ex-wife.