Financial Provision on Divorce and Sequestration
Sequestration is an insolvency process where an insolvency practitioner (“trustee”) takes possession of a debtor’s assets to sell them in order that the sale proceeds can be distributed amongst the debtor’s creditors. Section 31 of the Bankruptcy (Scotland) Act 1985 provides that the “whole estate of the debtor shall…. vest in the trustee as at the date of sequestration for the benefit of the creditors”. The debtor’s estate may include heritable property belonging to the debtor as at the date of sequestration (the date when the warrant to cite is granted by the Court).
Heritable property is usually the most valuable asset in the debtor’s estate and so it is of the most interest to the trustee (as it may hold the most potential to pay the creditors). If either spouse is sequestrated during the course of the marriage the matrimonial home would likely vest in the trustee as at the date of sequestration. However the way in which the trustee can sell the property will be governed by the ownership and occupational status of the property the day preceding the date of sequestration. In Section 40(4) of the 1985 Act, a “family home” is described as a property which the debtor has an interest in on the day before the date of sequestration. It also had to be a property that was occupied as of that date by the debtor’s spouse or civil partner (regardless of whether the debtor lives there) or by the debtor and their child (or grandchild or child not of blood but accepted to be like a child of the family).
In the event that the trustee cannot obtain the relevant consent to sell the property from the debtor, debtor’s spouse or civil partner, he will have to apply to the Court. In any court process the child’s interests must be taken into account but it is not a prerequisite that the child’s consent is gained by the trustee before taking possession of the property to sell it. The way in which the Court action is raised varies depending on the family dynamics as at the day before the date of sequestration. The Court has wide discretion and will take into account the financial needs and resources of the debtor’s spouse (or former spouse), civil partner (or former civil partner), a child of the family, interests of the creditors and the timescale which the property has been a family home.
The interests of the creditors is usually the Court’s paramount consideration. Although it would be unlikely for the trustee’s application to take possession of the family home (which would likely include evicting the debtor and/or spouse so that the property can be sold with vacant possession) to be refused, it is not uncommon for the Courts to defer granting decree for a period of time (a maximum of three years and of course much less in some cases). This allows the debtor and/or his family time to resolve the situation which may include finding alternative accommodation and vacating the property if necessary. The debtor’s spouse or civil partner with an interest in the property may try and negotiate with the trustee to purchase the debtor’s share of the property from the trustee. The trustee must sell the family home within three years of the appointment or else the family home may discontinue to be part of the debtor’s sequestrated estate and may reinvest in the debtor.
Contact BBM Solicitors Edinburgh & Wick
For further advice on financial provision on divorce or separation and the impact sequestration can have on this (and the matrimonial assets) please get in touch or contact Joanna Morris, Senior Solicitor at email@example.com or call 01955 604188.