The Impact of the Credit Crunch on Financial and Property Matters

“Ancillary relief” is the term used by lawyers to describe the orders that a court can make in connection with financial, property and pension issues following marriage or civil partnership breakdown.

It is extremely likely that the current “credit crunch” will impact on such orders as it will do with other areas of life.  After all, statistics supplied by HM Land Registry show a fall in property prices of 9.2% nationwide in a one year period.  The same statistics show that actual property sales have dropped almost four-fold.  Meanwhile the number of unemployed people continues to increase.  What sort of impact will these events have on ancillary relief orders?

One consequence flows from the fact that the courts work on the value of assets at the date of trial.  It can take 9 to 12 months for a full ancillary relief application to get to the trial stage.  At present assets are likely to have dropped considerably in value between the time that an application was made to the court and the trial date.  This will apply not only to property but also to shares.  The FTSE 100 share index fell some 36% in the 6 months between 20 May 2008 and 28 October 2008.  Simply put, there may be insufficient assets available for division on an equitable basis between the parties.  This may prevent the court from achieving a “clean break” between the parties in a case where this could otherwise be achieved.

Maintenance payments too are going to be affected.  The level of bonuses traditionally earned in sectors such as banking is unlikely to be seen again in the future.  Indeed, such bonuses may well now be a thing of the past.  This will have a “knock on” effect upon the recipients of such maintenance payments.  

Job losses too will cause many people to be unable to meet their outgoings, including maintenance payments.  The courts may well face an increase in the number of applications by payers of maintenance to reduce the level of payments that they are required to make and to remit any arrears of such payments that have accrued.

A further consequence of an economic downturn is that the level of personal insolvencies (or bankruptcies) will inevitably rise.  Government statistics show a doubling of bankruptcies from a level of 26,776 in 2005 to 52,678 in 2007.  In all but exception circumstances, the interests of a bankrupt’s creditors will outweigh those of the bankrupt’s family.  This means that an application by the bankrupt’s trustee in bankruptcy for an order to sell the family home with vacant possession will usually be deferred by nor more than one year.

Family lawyers traditionally find that periods of economic uncertainty lead to an increase in the number of relationships breaking down.  After all, the loss of employment with the financial consequences that flow from this can clearly place considerable strain on the parties.  It is to be hoped that the steps being taken to restore confidence in the economy and to end the credit crunch will succeed.

For further information regarding matters arising from this article, please telephone Christian Abletshauser on
01932 852057, or email him: ChristianAbletshauser@meadowsfraser.com