Bankruptcy

Bankruptcy of an individual (referred to as a debtor), joint debtors, or debtors in partnership is initiated either voluntarily or by court order on the application of a creditor. In these matters one of the Kazar Slaven partners would be appointed as trustee of the bankrupt estate.

The role of the trustee is to recover a bankrupt’s property (with certain limits) and divide the proceeds of sale among creditors in accordance with the Bankruptcy Act 1966 (the Act).

A debtor deciding to declare voluntary bankruptcy must complete a debtor’s petition accompanied by a statement of their affairs. On lodgement of these documents with an office of the Insolvency and Trustee Service Australia (ITSA), the debtor becomes bankrupt.

A creditor wishing to have a debtor declared bankrupt must follow a course of action as set out in the Act. This may result in a court order, known as a sequestration order, being made declaring an individual bankrupt. In these circumstances, referred to as a creditor’s petition bankruptcy, a bankrupt is required to submit a statement of affairs to an ITSA office within 14 days of receiving notice of becoming bankrupt. The term of bankruptcy commences from the date of filing this document.

A trustee is appointed to administer a bankruptcy, and in the case of a debtor’s petition bankruptcy, an individual may obtain the consent of a registered trustee in bankruptcy to administer their estate. In the absence of such consent being provided, the Official Trustee in Bankruptcy (ITSA) will be appointed.

In the case of a creditor’s petition bankruptcy, the court will usually appoint a registered trustee nominated by the creditor making the application for bankruptcy or if no such consent has been provided, the Official Trustee in Bankruptcy will be appointed.

The trustee’s duties include:

• Advising creditors of the bankruptcy and likelihood of a dividend
• Securing, valuing and realising the divisible property (see treatment of assets in Bankruptcy) of the bankrupt estate
• Reviewing transactions to which a bankrupt has been party for the purposes of determining whether property transferred prior to bankruptcy can be recovered
• Ensuring the bankrupt discharges their responsibilities under the Act

Undertaking regular reviews of a bankrupt’s actual and expected income for the purposes of determining whether a proportion of it is payable to their estate.