A woman whose ex-husband declared himself bankrupt shortly after their divorce was finalised has won a landmark ruling protecting her share of the financial settlement from her ex-husband’s creditors.

Following a contested divorce, the family court awarded Wendy Haines a 100 per cent interest in the house she co-owned with her husband. But Mr Haines filed for bankruptcy within a few weeks of the settlement, leaving his ex-wife vulnerable to claims from his creditors.

Under the Insolvency Act 2006, creditors are able to challenge any transactions, including those authorised by a court, where an asset is transferred for little or no value shortly before filing for bankruptcy.

The law is designed to prevent people from dodging their creditors by effectively giving away their assets before bankruptcy.

Trustees acting for Mr Haines' creditors challenged the property transfer, asking a judge to overturn it so they could claim Mr Haines’ 50 per cent share of the property in order to sell it and pay off his creditors.

Lawyers for the trustees argued that since Mrs Haines had not paid her husband for the 50 per cent stake in their house the transfer was done for no value and so should be reversed under the terms of the Insolvency Act.

However, District Judge Cook refused to overturn the transfer. He ruled that it did have some tangible value, as the settlement was binding and Mrs Haines could not go back and ask the family court to increase her share of the settlement to compensate for losing her share of the house.

Mrs Haines’ solicitor, Rob Taylor of Harrison Clark, said that the judge opened his ruling by saying this was the first time a property transfer had been challenged under the Insolvency Act in these circumstances.

Jeremy Abraham, head of private client and family law at Russell Jones & Walker, said: “It is a pleasant surprise to see a judge conclude that when the twin disasters of divorce and insolvency strike, divorce comes out on top for once.”

"Most such cases are resolved by pragmatic negotiation. It looks like the trustees gambled and lost.”

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