NSW Bankruptcy and Joint Loan

[rsjaus]

Hi,
My ex-wife and I had a joint unsecured personal loan of $15,000 for a car. We agreed that I would keep the car and continue the repayments. As of early this year I entered an agreement with the bank that I would pay $405 per month over 3 years without interest.

We officially got a divorce on 7/4/14. My ex-wife then applied for a financial order which was granted through the Federal Circuit Court. In short, the order states that she would transfer her right title and interest to me and that I will indemnify her against all payments and liability.

I have since been unable to meet the payments among other debts and filed a debtor's petition through AFSA which was finalised in April 2015.

I have been advised by AFSA that I'm under the limit threshold for any amount to be issued to creditors. They've advised I'm protected against the loan but that the creditor can still pursue my ex-wife. They've also advised I can still make payments to that creditor (to help my ex-wife) if I would like to and the other creditors cannot seek any monies as a result.

My ex-wife is a sole parent (we have a 4 year old Son together) with 100% custody and receives regular reliable child support. She receives FTB through Centrelink and also works another job. Can the creditor go after her? Given her circumstances is the bank likely to pursue her over a debt of $15,000 or could they possibly write it off? Can I still be made liable through the courts considering the order states that I indemnify my ex? Could my ex take this back to court?

My ex has very little assets and no property, shares etc. She has a violin, piano, car and some basic home items like furniture, kitchen appliances etc. She lives in a very modest house. Is it possible they would be successful in trying to garnish wages from her? Is it likely the bank would apply for a sequestion order? If made bankrupt either through a debtors petition or through a sequestion order, is she likely to lose the violin, piano etc?

Sorry, so many questions and alot of information, but I hope this is useful in providing some guidance.

 

[Tracy B]

Hi Rmooreau,

1. Your wife's liability for the $15,000 loan

Your wife will continue to be liable for the $15,000 loan. When the bank entered into a payment arrangement with you ($405 per week), is that an agreement between yourself, the bank and your wife? If so, she should comply with the instalment payments. She should contact the bank ASAP and negotiate a payment arrangement.

2. What happens to your wife's assets?

Nothing, if your wife makes repayments. If she does not, it will depend on the loan agreement with the bank. What does the agreement say about events of default? The bank is an unsecured creditor, which means there are no specific assets they can possess and sell. However, if your wife continues to miss payments, the bank can apply to court for a judgement debt order against your wife. If your wife refuses to apply, the bank can then apply for an enforcement order. There are many ways the bank can enforce a judgment debt:

• Get a warrant for her possessions;
• Get an order from court for "attachment of earnings" which gives the bank a portion of your wife's wages;
• Get an order for payment in instalments;
• Get an order from court to sell her house (unlikely given the amount of the debt is quite small); or
• Commence proceedings to declare your wife bankrupt.

3. What are your liabilities?

Your wife has a financial order against you. This is a debt. When you declared bankruptcy, your assets will be managed by a trustee in bankruptcy, who will split your assets amongst your creditors. Your wife is one of these creditors. Therefore, she will get a portion of your assets. As can the bank, in satisfaction of the $15,000.