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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.

An Important Message

While every effort has been made to provide valuable, useful information in this publication, this firm and any related suppliers or associated companies accept no responsibility or any form of liability from reliance upon or use of its contents.  Any suggestions should be considered carefully within your own particular circumstances, as they are intended as general information only.

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