Hamilton Murphy Advisory offer a full suite of bankruptcy advice services, each optimised to the circumstances of the individual and carried out with compassion and respect. Our bankruptcy experts and registered Trustee’s operate in Melbourne and across Australia to help you understand and navigate the process of bankruptcy.
For bankruptcy advice in Melbourne, Sydney, Brisbane, Gold Coast, Perth, or across Australia, please contact us – contact your nearest Hamilton Murphy team.
Once a person is made bankrupt, a Bankruptcy Trustee is appointed. The Trustee manages the bankrupt estate of the individual.
As a personal insolvency expert, the bankruptcy trustee is a registered and qualified specialist who is either a public servant (the Official Receiver) or an officer of the court (a registered bankruptcy trustee). Prior to presenting a creditor’s or debtor’s petition for bankruptcy, the individual can gain consent from the registered bankruptcy trustee of their choice. If no registered bankruptcy trustee is engaged, the Official Receiver becomes the bankrupt individual’s trustee.
A bankruptcy trustee has authority over the bankrupt individual to:
Fundamentally, the bankruptcy trustee is empowered to exercise all the bankrupt individual’s rights prior to their bankruptcy for them. Furthermore, there are additional recovery powers that can be exercised by the trustee that the individual does not have.
During the bankruptcy process, the trustee will:
As professionals appointed by the Court to oversee the sale of real property, Statutory Trustees are tasked with the goal of achieving the best possible result for beneficiaries. Real property includes both undeveloped land or blocks with houses or other structures built on them, and the Statutory Trustee is obliged to consider the needs of all beneficiaries against the property’s final sale price and the timeframe.
Statutory Trustees are often appointed when there is a disagreement among multiple owners of a property that is subject to sale. The appointment normally occurs during:
Statutory Trustees play an integral role in the division of assets in these complex scenarios. The Bankruptcy Trustee may not always be able to immediately sell the property to pay the creditors of a bankrupt individual. Although it is common for other co-owners to buy the bankrupt individual’s share of a property, there are times when they may not be able to afford this solution or are simply unwilling to cooperate. In these circumstances, the Bankruptcy Trustee may apply to the court to have a Statutory Trustee appointed.
Once appointed, the Statutory Trustee takes legal possession of the real property and does not require any consent or permission from any of the owners to sell the property. They are obligated to perform the sale in a neutral and unbiased a manner, handling every step of the process, including valuation, securing a real estate agent, advertising and so on. The final step is to disburse the proceeds of sale as required.
Bankruptcy can come in two forms – voluntary and involuntary. Under a voluntary bankruptcy, you file for bankruptcy on your own behalf. Inversely, involuntary bankruptcy is as its name suggests; others are filing for you to be determined as bankrupt.
The legal definition of bankruptcy is covered in section 5 of the Bankruptcy Act 1966 (Cth), and bankrupt individuals are defined as being in one of the two categories: the debtor’s petition (voluntary) and the creditor’s petition (involuntary).
Under a Debtor’s Petition, a person files the bankruptcy application for themselves at their own discretion and there is no minimum debt requirement to do so, as the application is completely voluntary. The steps under this process are:
An Official Receiver may reject a debtor’s petition in certain circumstances. These instances are more likely to occur when there is likelihood that the individual can pay off their debts within a reasonable amount of time, or if there is any evidence or indication that the individual simply doesn’t want to pay their creditors.
Unlike the voluntary process, a creditor’s petition allows for a determination of a bankruptcy via court proceedings, otherwise known as a ‘sequestration order’. For a creditor’s petition to be successful, a number of requirements must be met:
Under the Bankruptcy Act 1966 (Cth), an ‘act of bankruptcy’ refers to actions by an individual look that make them appear like they will soon be bankrupt. The most common of these is the individual not complying with a bankruptcy notice, but others may include the going overseas with the intent of holding off creditors, or giving notice to any creditor that they have or will halt payment of any debts owed. In addition, the lodgement of a Declaration of Intention to Present a Debtor’s Petition under the voluntary process is also considered an act of bankruptcy.
A creditor’s petition may also be rejected for similar reasons as is possible with the debtor’s petition, such as evidence that an individual is likely to be able to repay their debts to the creditor.
A late individual’s assets, debts and liabilities are collectively referred to as their ‘deceased estate’. In most scenarios, the Will left by the deceased person is used to guide the administration of their estate. Assets are normally distributed among the late individual’s beneficiaries (family and friends), in accordance with the terms of the Will.
All assets, debts and liabilities are included in a deceased estate, often comprising some or all of the following:
Most debt types will remain after an individual’s passing. Before the state’s assets can be distributed to beneficiaries, creditors have the primary right to recoup any money owed to them. This process is normally handled by the executor of the deceased individual’s Will, assuming the deceased estate is financially sound. The executor’s responsibilities include notifying creditors of the late individual, processing their claims and making the necessary payments. To be deemed insolvent, a deceased estate lacks the resources needed to pay off its outstanding debts.
Creditors are only able to make claim on funds they are owed from the deceased estate – the beneficiaries are not normally responsible for paying back any debts if the estate lacks the funds or assets to cover them. For shared debts, such as in the case of spouses or couples, the remaining living individual(s) are still responsible for their portion of debts shared with the deceased individual.
Creditors can, in some instances, apply to have an insolvent deceased estate administered in accordance with Part XI of the Bankruptcy Act 1996. To do so, an estate must be insolvent with debts of $10,000 or more, and occurs when:
Only the Federal Court or Federal Circuit Court has the authority to issue an order for the Administration of a Deceased Estate. An Independent Trustee will then be chosen and appointed to manage the deceased estate.
A regular bankruptcy process and the management of an insolvent deceased estate are quite similar. The financial affairs, assets, debts, and obligations of the estate will be assessed by the appointed Trustee. Following investigation, the Trustee will evaluate creditor claims and allocate any funds and assets. The Trustee may sell assets and distribute the proceeds to creditors fairly as part of this process. Depending on the nature of debt, distributions are made to creditors in specific order:
Appointing a Trustee to administer a deceased estate has a major benefit in that the Trustee may set aside any voidable transactions. This can potentially raise the deceased estate’s value, placing it in a better position to pay its creditors and beneficiaries.
A bankrupt individual may put forward a proposal to their creditors to resolve their debt owed, and ultimately have the bankruptcy annulled. The proposal is referred to as a ‘Section 73 Composition’ or ‘Section 73 Proposal’ as it exercises the use of Section 73 of the Bankruptcy Act 1966 (Cth).
In most instances, creditors will be compensated more for their debts under a Section 73 Composition than they would be under a continuing bankruptcy. The proposal can take many forms, but would most likely involve one or more of the following:
In addition to the above arrangements, a bankrupt individual will also have to pay their trustee’s fees and expenses, which relate to reporting, proposal composition and holding a meeting of creditors for their consideration of the proposal.
Once the composition is put forward, a meeting of Creditors is called by the Trustee. The Trustee is required to recommend whether they believe the proposal should be accepted, but the Creditors have no obligation to follow the Trustee’s recommendation. For the composition to approved in what’s considered a ‘special resolution of creditors’, it must be agreed to in both majority number and over 75% of the value of the creditors’ owed debts. If rejected, the bankruptcy continues.
If accepted, the bankruptcy is immediately annulled. The Trustee then proceeds to manage the composition’s arrangements, collect all funds, and distributes them to the individual’s creditors in accordance with the Bankruptcy Act 1966 (Cth). Following completion of the arrangements as detailed in the composition and all its conditions are met, the Trustee will notify AFSA that the matter has been resolved.
An annulment is the cancellation of a bankruptcy. Unlike the discharge of a bankruptcy, that happens automatically after the bankruptcy period has elapsed (generally 3 years and 1 day after the individual’s statement of affairs was accepted), an annulment results from one of three specific events:
Although an annulment means a bankruptcy is cancelled, the bankrupt individual’s name will remain on the National Personal Insolvency Index forever, with a markup that the bankruptcy was annulled. Credit reporting agencies may keep this record for 7 years. However, upon annulment, after the Trustee’s fees and expenses are settled, any surplus assets or funds will be returned to the bankrupt individual.
It’s also important to note that an annulment does not wipe the debts of a bankrupt individual that would also not have been released upon discharge of their bankruptcy, such as court-imposed penalties or fines relating to an offence against the law or child support debts.
Specialist assistance and guidance are required to successfully obtain bankruptcy annulment. There are various nuances affecting the process that are dependant on the circumstances of each individual. How well the process is managed will also have an impact on the results.
At Hamilton Murphy, we provide bankruptcy advice for people who are in financial distress. Our team offers options, information, and advice that is based on respect and a strong understanding of your situation. With offices in Victoria, Western Australia, Queensland, and New South Wales, we proudly assist individuals from across the country, no matter your circumstances.
Whether you need bankruptcy advice in Brisbane, on the Gold Coast, or in the heart of Perth, we are here for you. Hamilton Murphy have registered Trustee’s and Liquidators working in Melbourne and across Australia and can assist you with corporate insolvency matters.
For more detail about any of our bankruptcy services, or to have a confidential and obligation free initial discussion, please contact your local Hamilton Murphy team. We offer bankruptcy advice in Sydney, Perth, Brisbane, Gold Coast, Melbourne, and across Australia.
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