Assets in Bankruptcy
- What will happen to my assets?
- What assets may I keep?
- What assets will my trustee sell?
- Assets that vest in the trustee
- What about assets I own with someone else?
- What about assets I used to own?
- What about secured creditors?
- Legal claims you may have against someone
- Assets that haven’t been dealt with before your bankruptcy ends
- How will the trustee know what assets I have?
- What will happen to my assets?
When you become bankrupt, a trustee is appointed to administer your bankruptcy. He then really owns all of you assets except for certain items that you may retain e.g. Superannuation and some work tools, and the trustee may sell certain assets for the benefit of your creditors (people you owe money to). Assets are anything of value you own at the time of becoming bankrupt, and anything you buy or receive or become entitled to during your bankruptcy.
What will happen to my assets in bankruptcy?
What assets may I keep?
The Bankruptcy Act allows bankrupts to keep certain assets. These include:
- most ordinary household items
- tools used to earn an income up to an indexed amount
- vehicles (eg cars or motorbikes) where the total value of the vehicles minus the sum owing under finance is no more than an indexed amount
- most balances in regulated superannuation funds and payments from regulated superannuation funds received on or after your date of bankruptcy (superannuation payments received before you go bankrupt are not protected)
- life insurance policies for you or your spouse, and the proceeds from these policies received after your bankruptcy
- compensation for a personal injury, such as an injury to you from a car accident or workers’ compensation (whether received before or after the date of bankruptcy), and assets bought wholly or substantially with such compensation
- assets held by you in trust for another person (for example, a child’s bank account)
- if creditors agree, awards of a sporting, cultural, military or academic nature made to you, such as medals or trophies, and claimed as having sentimental value.
What assets will my trustee sell?
Apart from the assets that you are allowed to keep, your trustee will recover any assets even if they are overseas or in someone else’s possession. Examples include:
- houses, apartments, land, farms and business premises (including leases)
- motor vehicles (other than exempt ones)
- shares and other investments (including shares held in your employer’s business)
- tax refunds for income earned before you became bankrupt
- proceeds of a deceased estate where the person dies before or during your bankruptcy
- lottery winnings and other competition prizes.
Assets that vest in the trustee
All of the assets that belonged to you at the start of your bankruptcy, or that you get during the bankruptcy, “vest” in the trustee (unless the property is specifically exempt). What this means is that the trustee is given the power and authority to deal with the asset(s) and you no longer have any claim to them and no longer have any right to deal with them. The trustee has rights to take physical possession of and control of the assets, including the right to sell them. If bankrupt, you are not permitted to deal with property that belongs to the trustee, even if it’s still registered in your name.
What about assets I own with someone else?
If you have a share in an asset, for example a house that you own with your partner, your share of the asset vests in the trustee, and the trustee can sell your share. If the co-owner is not bankrupt, the trustee may agree to sell your share to them for market value. For more information regarding jointly owned property, see the house properties page.
What about assets I used to own?
Your trustee has powers to investigate assets you owned before your bankruptcy. If you have given away or sold assets for less than their value prior to bankruptcy, the trustee may either recover these assets (that is, take possession of them and deal with them) or the difference between the true value of the asset and the amount you received for it. These types of asset transfers are called antecedent transactions.
What about secured creditors?
Common examples of secured assets are:
- a house subject to a mortgage with a bank
- a motor vehicle subject to a bill of sale
- goods under hire purchase, chattel mortgage, lease or bill of sale with a finance company
- real estate subject to a charge by local councils for outstanding rates or water charges.
A secured creditor cannot take possession of an asset just because you are bankrupt. However, if you fall behind in your payments, they can take and sell the assets (whether or not you are bankrupt). See your debts and creditors.
Legal claims you may have against someone
When you become a bankrupt, most legal actions that you have commenced needs to cease. Your trustee will determine whether to take any matter/s further and in order to make this decision may seek from you documentary evidence regarding the legal proceedings. Other actions you believe need to be pursued will need to be brought to the attention of and discussed with your trustee, who will make an assessment on the viability of the action or whether it is an action you may continue with. If your claim relates to a personal injury or wrong done to you, your spouse or a member of your family, or it relates to the death of your spouse or a member of your family, you may be entitled to pursue that claim even after you have become bankrupt. It is important to discuss these issues with your trustee who can provide you with further information in relation to such actions or claims.
Assets that haven’t been dealt with before your bankruptcy ends
Your discharge from bankruptcy does not automatically return assets to you which have not yet been dealt with by your trustee. The trustee may have been unable to sell all your assets straight away and may take several years to sell them. If there are assets that vested in your trustee and your bankruptcy is annulled (that is, cancelled), the remaining assets will be returned to you.
How will the trustee know what assets I have?
The trustee can get information about your assets from a variety of sources including:
- your statement of affairs
- asking you for information
- from your creditors
- from searching the Personal Property Securities Register and State/Territory land title databases
- from third parties.
There are penalties for failure to disclose your assets, whether owned prior to bankruptcy or acquired during your bankruptcy. These penalties can include extending your bankruptcy and imprisonment for up to 12 months upon conviction. Should you acquire or become entitled to assets during your bankruptcy, you must disclose all of these to the trustee, in writing, within 14 days or as soon as practicable.