The struggles of a divorcee to keep the value of the family home from the clutches of her ex's bankruptcy trustees highlights the need for clarification of the insolvency laws, claims a Midlands lawyer.

Carla Hull, of leading law firm Needham & James, says the forthcoming ruling in the case of Hill and Bangham vs Haines currently being heard in the Court of Appeal could have massive ramifications for those granted property orders by the divorce courts.

Wendy Haines, aged 43, from Stourport-on-Severn, was awarded the matrimonial home after an acrimonious divorce. However, just a few weeks after the pronouncement of the decree absolute, Mrs Haines' former husband petitioned for his own bankruptcy.

Under the terms of the 1986 Insolvency Act, trustees in bankruptcy have very wide powers to act on behalf of the creditors to recover monies owed and Mr Haines' trustees took steps to realise some value from the matrimonial home.

They brought the case to the High Court in May this year where Judge Pelling QC ruled that Mrs Haines should relinquish half her share in the property, effectively overturning the order made in the family courts - and flying in the face of many previous judgements.

Ms Hull says the ruling was highly significant as it effectively "killed off" Matrimonial Property Adjustment Orders, putting at risk many divorcees who thought their financial position was settled.

She said: "Previous case law established that orders made under Family Law (Matrimonial Causes Act 1973) were exempt from challenges from bankruptcy trustees when the order had been made within contested proceedings and before the bankruptcy petition had been presented. As it stands now, for up to five years after a divorce, should a former spouse be declared bankrupt, their ex may have no defence to an application by the trustees to set aside a property order made by a matrimonial court.

"While recognising the protection this offers creditors in cases where financial desperation may lead couples to collude to abuse the law to safeguard their assets, the current position leaves many former spouses vulnerable to the claims of trustees.

"This applies not only to those divorcing today, but anyone who has divorced over the past five years. Needham & James is urging the Government to make Family Orders made by the Judge in contested divorce proceedings to be made an exception to the Insolvency Act, or at least for further clarification as to what is an 'under value' in the context of a matrimonial settlement.

"Meanwhile, our advice to divorcees who may find themselves in this position includes seeking to limit the period in which claims may be made following bankruptcy of one of the parties from five years to two years by inserting a Declaration of Solvency into a Consent Order where possible."

She added: "The judgment of this high profile case is awaited by family lawyers and insolvency practitioners alike with great interest. The fear is that if Mrs Haines fails in her appeal, it will encourage trustees to reopen long dead files and many unfortunates will be recipients of demands for a share in their home."

The position for divorcees who have Consent Orders made outside of contested proceedings for the time being remains unchanged, in that transfers made under agreement can be challenged by future trustees in bankruptcy.

Needham & James has offices in Birmingham, Stratford-upon-Avon, Moreton-in-Marsh and Shipston-on-Stour.