Divorcees to be liable for debts of their former partner

A landmark High Court ruling yesterday slammed shut a loophole that helped thousands avoid the claims of their ex-spouse's creditors.

It means that the former wife - or husband - of someone who has gone bankrupt can be chased by creditors for the property and cash they took from the marriage for up to five years after their divorce.

Scroll down for more...

The decision could affect up to 25,000 a year and comes after a series of multi-million pound payouts to divorcees.

Gareth Schofield of Clarke Wilmott, the law firm that took the case to the High Court, said: "This decision will have a profound effect on the way clients are advised on settlement in divorce where bankruptcy is a potential issue.'

The ruling was made by Judge Pelling QC in a case involving an "extravagant" couple from Worcestershire.

David and Wendy Pearl Haines, from Stourport-on-Severn, were owners of a home called Strudges Farm.

In their divorce in 2003, she was awarded the house. And in 2005 her husband was made bankrupt, owing £132,000.

His creditors sought to make a claim on the house, in Birmingham County Court.

The judge said the couple had been "extravagant in the acquisition of the house, horses and cars" and had lived beyond their means but did not find for the creditors.

They appealed to the High Court and won. The ruling will put a question mark over the property of wives or husbands of the 120,000 who go bankrupt each year.

One in five of these couples - or 25,000 - is likely to have contested divorces.