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A bankruptcy Trustee has a duty to realise any assets capable of commercial realisation for the benefit of creditors of the bankrupt estate. All of the bankrupt’s divisible property owned prior to bankruptcy vests in a Trustee in bankruptcy as at the commencement of bankruptcy.

Property acquired by the bankrupt after the commencement of bankruptcy but before discharge also vests in a Trustee, for example:

  • property inherited by the bankrupt
  • lottery / gambling winnings
  • property or vehicle given or purchased by the bankrupt
  • mortgaged goods paid off during bankruptcy
  • any assets acquired by the bankrupt during the bankruptcy from income / savings

Divisible property is property that a Trustee can take and sell for the benefit of creditors, for example:

  •  real property
  •  cash at bank
  •  stocks and shares
  •  property located overseas
  •  gifts and inheritances received from a Will
  •  valuable furniture, high value art, jewellery, antiques
  •  income tax refunds relating to income earned before bankruptcy
  • jointly owned assets (the bankrupt’s interest will vest in the trustee)
  • tools of trade (hat exceed the threshold limit currently $3,750* (indexed)
  • vehicles with equity exceeding the threshold limit currently $7,900* (indexed)

Non-divisible property is property that is not available to a Trustee in bankruptcy and the bankrupt is able to retain, for example:

  • tools of trade up to the value of $3,750*
  •  vehicle which has an equity value of up to $7,900*
  •  superannuation funds balances and payments received
  •  a right to recover and retain damages
  •  personal injury compensation / assets bought with those funds
  •  bankrupt’s right to maintain legal professional privilege
  • necessary household items (e.g. furniture, whitegoods)
  •  awards of sentimental value (e.g. sporting, cultural, military or academic awards)
  •  Property held by the bankrupt as trustee on trust (e.g. child’s bank account)
  •  life insurance or endowment assurance policies of the bankrupt and proceeds from these policies
  •  property under order of Part VIII of the Family Act that the trustee is required to transfer to the bankrupt’s spouse
  •  loan or grants received through certain government rural support schemes for household support or rehabilitation

A bankrupt’s property (other than cash) will revest back to the bankrupt 6 years after the bankruptcy discharge date if the property is disclosed in the bankrupt’s Statement of Affairs. In relation to after-acquired property disclosed subsequent to the discharge date, the revesting date is 6 years after the date that the bankrupt disclosed the property to the Trustee. This means if the Trustee has not dealt with the property, ownership reverts to the now ex-bankrupt.

The Trustee is also unable to make a claim to any of the bankrupt’s property after the expiration of 20 years from the date of bankruptcy.

How Vincents can help

Speak to our Restructuring & Recovery specialists today to understand your rights, obligations and options during bankruptcy, and how to best protect your financial future.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

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