Marriage breakdown causes debts to be incurred but is sometimes the result of problems arising from an accumulation of unmanageable debt. If one spouse is made bankrupt his or her property passes to or vests in the person appointed to be the trustee in bankruptcy when the bankruptcy order is made.
Although insolvency giving rise to bankruptcy is now decreasing, the number of bankruptcies between 1988 and 1992 increased from 7,717 to 32,106. Where one or both parties to a marriage are involved in small businesses with debt difficulties they will need specialist advice if they are to negotiate the pitfalls of possible bankruptcy.
The law on bankruptcy is now contained in the Insolvency Act 1986 and the Insolvency Rules of the same year.
If there is a possibility of one spouse becoming bankrupt the solicitor acting for the other will want to make a bankruptcy search to ascertain whether a bankruptcy order has already been made. This simple procedure involves a bankruptcy search at the Land Charges Department in Plymouth (see p. 223). There is a fee of £1, or £2 by telephone. If the result is PA (B) it means that a bankruptcy petition has been presented or if the result is WO (B) a bankruptcy order has been made. If the property is registered an application must be made to HM Land Registry with the title number of the property quoted in the application for office copies of the entries on the register. For example, if the property is in the name of one spouse, and a bankruptcy petition has been presented, the register may show a ‘creditors’ notice’, or if a bankruptcy order has actually been made it will show ‘bankruptcy inhibition’. If a property is jointly owned a caution will have been registered by the trustee in bankruptcy.