Undoing divorce transfers in bankruptcy MCA 1973 s. 39
A property transfer made under a family court order is not immune from being set aside as a transaction at undervalue or preference upon bankruptcy.
The fact that a settlement or transfer of property had to be made in order to comply with a property adjustment order shall not prevent that settlement or transfer from being a transaction in respect of which an order may be made under section 339 or 340 of the Insolvency Act 1986 (transactions at an undervalue and preferences.)
Text in force at .
Source: legislation.gov.uk — The National Archives (legislation.gov.uk), reproduced under licence Open Government Licence v3.0.
What it actually says
When a court orders a person to transfer property or make a settlement to comply with a property adjustment order during divorce proceedings, that transaction does not receive special protection from insolvency law.
If the person who made the transfer later becomes bankrupt, a trustee in bankruptcy may challenge the transfer under insolvency legislation as a transaction at an undervalue or as a preference.
When it applies
- A spouse transferred ownership of a home following a property adjustment order, and their trustee in bankruptcy later seeks to void the transfer.
- A former partner settled property into a trust under a family court order, and creditors challenge the disposition after bankruptcy proceedings begin.
- A bankrupt individual argues that a transfer of assets cannot be set aside because a judge mandated it in matrimonial proceedings.
What this section does not say
- Transfers made specifically to defeat a spouse's claim for financial relief prior to bankruptcy.
- The specific procedure or time limits for a trustee to claim a transaction at an undervalue under insolvency rules.
- Reductions or variations to monthly spousal maintenance orders due to personal insolvency.
Related sections
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This page reproduces the text of MCA 1973 s. 39 in force at the date shown and explains it in general terms. It is not legal advice and takes no account of the circumstances of your case, which can change the answer completely. For a live dispute, for limitation periods, and before taking any step in court, consult a qualified lawyer in England and Wales.