If you are reading this, it is probable that you are the debtor who has been sequestrated either by presenting a Debtor’s Petition or the presentation of a Creditor’s Petition. But you may be wondering, what property actually vests in the trustee? In other words, once you have been officially declared bankrupt, what property can the trustee liquidate in order to pay your creditors?
Property that the trustee can take from you is known as ‘divisible property’ as well as any rights and powers to that property that would have been exercisable if the bankruptcy had not occurred. Divisible property is basically property that the trustee can take from you, sell and divide the payment among creditors. Common types of property that the trustee can take include:
- interest in housing;
- cash from your bank account;
- fixtures and fittings;
- stocks and shares;
- gifts and legacies; and
As we will cover below, there are some exceptions and you may be able to recover some of your assets if you satisfy the selected criteria.
What happens to your income during Bankruptcy?
Contrary to popular belief, once you become bankrupt you will most likely not stop working altogether. You are probably going to continue working and indeed insolvency law operates so as to encourage you to earn money so you can repay your debts. Accordingly, the trustee is not going to take away all your money and income and there will be a sort of sharing arrangement whereby you keep a share of the money you earn and the remainder is given to the trustee. So, in terms of your income, the trustee will assess your income in a period called the Contribution Assessment Period. If the income you earn exceeds a set ‘income threshold amount’, you are liable to pay contributions to the trustee. Practically, the contribution amount will be calculated in advance so you will know how much you can spend and how much you will need to hand over to the trustee. You will have to make continuous contributions, subject to the assessment periods, regularly until your bankruptcy ends. Income, in this context, includes anything you can think of as ‘incoming payments’ – from fringe benefits to family members giving you money. You are legally obliged to be honest and make full disclosure. For example, if you get a promotion and a salary raise, you will have to notify the trustee so as to make the correct assessment accordingly. If you do not, your bankruptcy period may be extended from the standard 3 years to a maximum of 8 years.
What if you do not pay your Contribution?
If you do not provide adequate reasons for not paying your contribution, the trustee is entitled access to every detail of what you are spending. It is important to note that there is also something called the ‘Supervised Account Regime’ that may come into play. In other words, the bank may be informed from the trustee or Official Receiver that you are bankrupt. As such, when your salary comes into your bank account from your employer, the bank will hold back the contribution amount so you will not be able to spend it.
Reviewing or Challenging the Contribution Assessment
When the trustee has finished his or her contribution assessment, they are required to give you a report outlining the particulars and details. They do this because you may be able to challenge certain calculations. For example, your wife may have suddenly fallen ill and you may require more money in order to pay for medications. You could challenge the assessment, but ironically, you will have to pay a fee for the challenge to be decided by the Inspector General who can either: confirm the trustee’s assessment, set aside the assessment or make a fresh assessment. Generally, if you do not get an answer within 60 days of lodging your complaint, the trustee’s assessment stands.
You may also challenge the assessment on certain grounds of hardship. You must apply to the trustee in writing. Some of the grounds on which you can apply to the trustee are where:
- You or a dependant suffers from an illness or disability and requires, for example, medical attention, medicines, equipment, or treatment;
- You need to pay child day care so as to enable you to go to work;
- You are living in rented accommodation and the rent increases;
- Your company has moved office locations and your travelling expenses to work from home has increased substantially;
- Your spouse or de facto partner has recently retired so you are now relying on one source of income.
As you can see, there are many reasons why you may be entitled to apply for a Contribution Assessment review. The complexities of vesting property in the trustee is a difficult area of law to navigate. It is strongly advised that you seek assistance from an insolvency lawyer so as to be fully informed of your rights and obligations. If you would like to discuss your situation with one of our specialist lawyers at LegalVision, please give us a call. We will assess your needs free of charge and provide a fixed-fee quote for any assistance you require.