Any property that a bankrupt acquires after he or she becomes bankrupt is known as ‘after-acquired property’. A bankrupt may acquire property by buying it or in other ways, such as through becoming entitled to receive an inheritance, or otherwise having the property devolve on them.
In most cases, a bankrupt’s after-acquired property vests in and comes under the control of their Trustee in bankruptcy in accordance with section 58 of the Bankruptcy Act 1966 (“the Act”). The Trustee can take possession of the after-acquired property (as long as it isn’t of a kind exempted under section 116 of the Act) and sell it for the benefit of the bankrupt estate.
The following are some examples of after-acquired property is treated during bankruptcy:
Generally, a bankrupt will not get to keep an inheritance that he or she becomes entitled to receive while an undischarged bankrupt. A person is allowed to change their will before they pass away to remove a beneficiary. Sometimes a family member of a bankrupt will do this to remove the bankrupt from being a beneficiary. However, once the bankrupt becomes entitled to receive an inheritance during their bankruptcy, this cannot be changed at that stage and the bankrupt’s share of the inheritance must be paid to the bankrupt estate.
Generally, a bankrupt will not get to keep gifts and prizes that are of commercial value that they become entitled to receive while an undischarged bankrupt. The Trustee of the bankrupt estate is entitled to claim the prize money or sell the gifts. This includes lottery and gambling winnings.
Any asset bought or acquired by the bankrupt during their bankruptcy would be claimed by the Trustee in Bankruptcy (as long as it isn’t of a kind exempted under section 116 of the Act). A bankrupt is permitted to keep savings from income they earn during bankruptcy in a bank account. However, if this money is used to acquire an asset, or even invested as a term deposit, it is considered as converted to an asset that would be claimed by the Trustee in Bankruptcy.
If the bankrupt becomes entitled to receive a life insurance payment from their partner passing away during their bankruptcy, the bankrupt is entitled to keep this.
A Trustee in Bankruptcy has broad powers to conduct investigations about a bankrupt’s assets and income throughout the period of bankruptcy and it can be quite likely that the after-acquired property will be discovered.
If after-acquired property is not disclosed by the bankrupt to their Trustee in bankruptcy in writing within 14 days of becoming aware of it, it will never “revest” in the bankrupt, that is, it will indefinitely remain under the control of the Trustee in bankruptcy, even if the bankrupt has already been discharged from bankruptcy.
Additionally, the bankrupt’s period of bankruptcy may be extended from 3 years to 8 years. The bankrupt may also be reported to the regulator, Australian Financial Security Authority (AFSA) for potential prosecution, which may result in monetary fines or imprisonment or both.
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