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Successfully avoiding bankrupt clients losing their home

Insolvency and Restructuring Case Study – A Trustee in Bankruptcy Attacks the Matrimonial Home.

This recent insolvency and restructuring case study shows how by acting quickly and decisively we were able to find a solution for our clients – a husband and wife, who were on the verge of losing their home. As a result of the husband’s bankruptcy, the Trustee in Bankruptcy had sought orders from the Court for possession and sale of their matrimonial home, to satisfy the creditors in the husband’s bankruptcy and pay the costs incurred in the bankruptcy. We were only instructed a week before the final hearing, and unless urgent action was taken on their behalf, the risk of losing their home and all the equity in it, built up over 30 years of marriage, was very real. Read on for details about how we were able to ensure they didn’t lose their home. It’s for delivering results like this to our clients, that we are delighted to say we have made it to the shortlist for Birmingham Law Society’s Law Firm of the Year, 2016 (up to 4 partners).

Background to This Case

The husband had been made bankrupt three years before and the Trustee in Bankruptcy was pursuing a Court application to realise his interest in the matrimonial home. The final hearing aleady loomed large when we were first instructed.  The Trustee in Bankruptcy (unusually) argued that the wife, who was not a legal owner of the property, had no financial interest at all in the home, even though she had lived there for 30 years. If that was correct, then the Trustee in Bankruptcy stood to realise an extra £75,000 from the wife’s share of the equity in the home, upon a sale of the property. It quickly became clear that the previous adviser to the clients had not done them any favours at all. It was, quite frankly, a mess when we picked up the case. A one day Trial was set to take place in the County Court only a week after we were instructed, which the clients would have to attend, give evidence at and be cross examined on their written evidence. However, it quickly became apparent that the written evidence they were planning to use and rely upon was weak, incomplete and did not address the key factual issues in the case. Further evidence needed to be drafted and quickly.

Our Response

Following our first meeting with the clients, and with only week to go before the trial, we urgently instructed a Barrister to consider the papers and prepare for the Trial with us. In parallel, we advised the clients of their options and worked on a settlement strategy. At our second meeting with the clients (and the barrister) on the next day, we identified:

  1. The clients’ objectives.
  1. Whether the objectives were achievable.
  1. A strategy to achieve them.

Further Evidence was Prepared

We urgently prepared witness statements for signing off by the clients, setting out their defence position (something which their former advisers had not done) so the Court at least knew what our clients would be arguing.  Intense and detailed negotiations with the Trustee in Bankruptcy’s solicitors followed. The further witness statements were finalised, signed and served on the Trustee in Bankruptcy’s solicitors at 5:00pm on the Friday before the Trial. On the particular facts of this case, we argued that in circumstances where the husband had transferred away his 50% beneficial interest in the matrimonial home back in 2007, the following consequences arose:

  1. Since that transfer in 2007, he had owned the home merely as a trustee; and
  1. The Trustee in Bankruptcy thus had no beneficial interest in the home.

That certainly concentrated the mind of the Trustee in Bankruptcy.

Our Objectives were achieved

The main objectives of the clients were: 1. To establish and reserve the wife’s 50% interest in the home (which interest at this point was denied by the Trustee in Bankruptcy);  and 2. avoid the stress of a contested hearing. Many discussions took place in a very short period of the time with the Trustee in bankruptcy’s solicitors, with the result that the above two objectives were achieved by negotiation. On the day of Trial, with the assistance of Counsel at Court, we were able to achieve a settlement that safeguarded the wife’s 50% interest in the equity in the house, without the need for the clients to go through the trauma of giving evidence and being cross-examined. We also achieved a favourable costs outcome, by negotiation.

Comment on this Insolvency and Restructuring Case

Had we been involved earlier in the case, we could have resolved the position at a much earlier point.  This case does however demonstrate that even having done nothing until a week before Trial, the clients still had options.  Our absolute commitment to finding the solution and protecting the clients certainly helped. As you can see no hole is too deep! It is always the case (and particularly so here) that the earlier that you get in touch with us the better.  Options are likely to be greater and more capable of achievement the more time that is available.  If you are facing a similar insolvency and restructuring problem such as this, or perhaps Director Disqualification, or a Misfeasance Claim (2 of our other key specialisms), then please contact us or call us today on 0121 200 7040 for a free initial discussion. Alternatively, why not email a copy of any threatening letter that you may have received for a no obligation/no pressure chat to us at: law@ndandp.co.uk?