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.
