How Do I Protect My Assets If Husband Goes Bankrupt?

Source : The Straits Times, Sunday, 26 Aug 2007

Q. MY HUSBAND has not been living in our matrimonial home, a condominium, for the past two years although we are not divorced.

The condominium was bought with my Central Provident Fund (CPF) money and some cash many years ago. It is under my sole name.

The only joint account we have is an overdraft account, against the mortgage of this condominium, which was taken out to help him start his business a long time ago.

He has his own credit cards and personal accounts. My other bank accounts are either in my name or jointly-held with my grown-up children.

My husband is addicted to gambling. I am very worried he will become a bankrupt.

Should this happen, will the Official Assignee (OA) be able to touch the money in my accounts or my children’s accounts?

If we are divorced, will my assets and those of my children be better protected? What is the best way to protect our assets?

A. THE OA acts for your husband in the event he becomes a bankrupt and will administer your husband’s assets to best satisfy the debts he has incurred.

It is your husband’s creditors who would make a claim for all his assets. The creditors cannot touch the money in your sole accounts or money in your joint accounts with your children.

They can only go after the money held in the name of your husband, whether it be solely held by him or jointly with any other person.

Since you say he has his own accounts separate from yours, the creditors cannot look to your bank money to satisfy the debts. They cannot take your condominium since it is in your sole name.

The only joint account appears to be the overdraft account secured by the condominium. This overdraft account is not an asset but a liability, so the creditors will not get any money out of it.

However, you are liable for the debts incurred on the joint account (the amount that has been overdrawn to date) and your condominium is the collateral, so make sure you do not default on payments to the overdraft. Otherwise, the bank is able to foreclose on the condominium.

The bank is usually also entitled to withdraw your overdraft facilities if your husband is made a bankrupt so you need to have a contingency plan for this.

The only advantage of being divorced is to determine the amount of matrimonial assets your husband is entitled to. The condominium is one of the matrimonial assets capable of division by the court.

However, since you are both already maintaining separate bank accounts and assets, there is no advantage to be gained from a divorce unless there are joint assets of which you wish to carve out your share before the creditors get to the assets.

The best way to protect your assets is to keep them strictly separate. You should not have any joint credit cards, bank accounts, properties or fixed deposits.

You seem to already have such separation of assets so that is sufficient to protect your assets.

Lim Choi Ming Partner Khattar Wong

Advice provided in this column is not meant as a substitute for comprehensive professional advice.