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Bankruptcy Case Studies In
Respect Of The Matrimonial Home
Background
Tony and Cherie are married. They
own their home jointly. The home is valued at £100,000
and is subject to a mortgage where £60,000 is still
owing.
Tony has run into difficulties
in respect of his sole trading business and owes £200,000
to his creditors.
Question
If Tony applies for his own bankruptcy
(or an IVA) what sum will Cherie need to find to enable the
matrimonial home to be transferred into her sole name and
be therefore safeguarded from her husbands creditors?
Solution
The sum needed is identified by
calculating the value of Tony's half interest in the equity
in the home.
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£
|
| Value of Property |
100,000
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| Less: Mortgage |
60,000
|
| Equity of Tony and Cherie |
40,000
|
| |
|
| Value of Tony's Half Interest |
20,000
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Comment
Cherie can raise the £20,000
either by:
- Increasing the mortgage to £80,000
or
- Taking out a personal loan of
£20,000
The £20,000 so raised is
paid into Tony's bankruptcy estate. Tony is then relieved
of the £200,000 of creditors to which he was previously
exposed.
The matrimonial home is now in
Cherie's sole name.
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