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DWF635/07
6 August 2007

With bankruptcies up 7.7 per cent on the same quarter last year, a lawyer has warned that a recent court ruling may affect a substantial number of bankruptcy cases.

Andrew Gregory, partner and head of business recovery at leading law firm DWF, says that the perceived ‘quick fix’ changes introduced by the Enterprise Act 2002 were designed to encourage people to rehabilitate by removing the long-term stigma of bankruptcy. The case may make bankruptcy a less attractive option for divorcing people in certain circumstances.

His comments come as the latest insolvency statistics released (on 3 August), show there were 16,258 bankruptcies in the second quarter of 2007. Whilst a decrease of 2.9 per cent on the previous quarter the underlying trend still remains upwards.

The decision in the case of Avis-v-Turner makes it clear that a property that remains in joint names under the terms of the divorce settlement may in certain circumstances be sold to pay off the bankrupt's debts.

Vivienne Avis was awarded two-thirds of the couple’s home in Kirkby, Merseyside in 1985 after separating from her husband Edmund. Mr Avis was declared bankrupt in 1989.

In 2003 a new trustee in bankruptcy – the person in charge of the bankrupt’s assets – was appointed and applied to the courts to have the house sold to pay the debts.

The Appeal Court backed the position taken by the High Court that the divorce settlement between Mr & Mrs Avis did not necessarily override the need to address the position of Mr Avis' creditors in his bankruptcy.

Andrew Gregory notes that "It is possible that this may not be the end of the matter as the High Court will now decide whether any "exceptional" circumstances are applicable to Mrs Avis's case, and entitle her to override the interests of her husband’s creditors. Dependent on the outcome of the exceptional circumstances argument, we may well see yet another appeal by the 'losing' side."

It is also anticipated that trustees in bankruptcy will now be re-evaluating their own position to see if this could apply to any of their own cases.

The latest figures show that in total there were 26,956 individual insolvencies in England and Wales in the second quarter of 2007, a decrease of 8.1 per cent on the previous quarter and an increase of 4.2 per cent on the same period a year ago.

This comprised 16,258 bankruptcies, a decrease of 2.9 per cent on the previous quarter and an increase of 7.7 per cent on the corresponding quarter of the previous year, and 10,698 Individual Voluntary Arrangements (IVAs), a decrease of 15.1 per cent on the previous quarter and a decrease of 0.7 per cent on the corresponding quarter of the previous year.

Gregory, whose team advises a large number of organisations, including Insolvency Practitioners, banks, and others in the finance industry says we can now expect to see record personal insolvencies in 2007 which he predicts could be in excess of 120,000.

-ENDS-

Notes to editors:

DWF is one of the fastest growing regional law firms in the UK and has recently merged with Ricksons. With over 820 people based in Manchester, Leeds, Liverpool and Preston, DWF provides a range of services grouped under the following practice areas:

Corporate
Banking & Finance
Business Recovery
Litigation
Real Estate
People
Insurance
Private Client

DWF has developed extensive sector-specific expertise in a number of areas including: automotive, education, food and resourcing. Further information on DWF is available via www.dwf.co.uk

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Sam Dabbs
Dabbs PR & Marketing
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