10 Feb 2015

If you are the spouse in a Family Court proceeding who becomes bankrupt, your property is immediately vested in the Trustee in bankruptcy (“the Trustee”) except for your: 

1. superannuation. (However, if you made payments made to a superannuation fund in order to defeat creditors those payments can be clawed back);

2. necessary household goods (beds, fridges etc);

3. motor vehicles to a value of approximately $7,200 (if the vehicle is worth more than this, the trustee can take the vehicle and must refund the bankrupt $7,200); 

4. tools of trade of approximately $3,550; and

5. proceeds of certain damages claims for compensation, and any property purchased with, or substantially with, the proceeds of such a claim 

The Trustee has to be joined as a party to the Family Court proceedings as they are not automatically a party to the proceedings.  The Family Court will grant an application of the Trustee to join the Trustee as a party to the proceedings where the Court is satisfied that the interests of the bankrupt’s creditors may be affected by the proceedings. 

If the Trustee is joined, the Trustee steps into the shoes of the bankrupt.  As a bankrupt you will therefore lose your right to make submissions regarding property vested in the Trustee.  You will be required to seek the Court’s permission to make submissions which will only be granted in exceptional circumstances.  However, as a bankrupt you can make submissions about property which has not vested (such as superannuation) and to make other submissions which may indirectly deal with vested property.

As a bankrupt, the issue which you will mainly be concerned about is whether certain transfers of property made by you can be “clawed back” by the Trustee.  The Bankruptcy Act provides that certain transfers can be “clawed back”: 

1. If you transferred property to your non bankrupt spouse within six months before you declared bankruptcy (in order to defeat creditors), the transferred property can be “clawed back.” 

2. If you made other transfers of property for the main purpose of preventing the transferred property from becoming divisible among creditors or to hinder or delay the process of making property available for division among the creditors, those transfers will also be “clawed back.”

3. If you were insolvent and you made a transfer to a creditor, that transfer will be void if the transfer gave the creditor a preference, priority or advantage over other creditors and occurred within six months before the bankruptcy commenced.

4. If you made other transfers of property within five years of the start of the bankruptcy and there was no consideration, or the transfer was for less than market value, those transfers will also be void against the Trustee.  Market value consideration does not include family relationship, marriage or de facto relationship or love and affection.

However, transfers are not void against the Trustee if they were made more than four years before the commencement of bankruptcy for related entities and two years before the commencement of bankruptcy for all other cases, and the transferor was solvent at the time of the transfer.

5. What about transfers made pursuant to Consent Orders? Consent Orders are approved by the court and therefore a transfer of property of a person who is bankrupt is protected and cannot be clawed back unless the parties did not inform the Trustee of the bankrupt spouse and did not make full and frank disclosure of their assets and liabilities to each other and creditors. 

As a bankrupt you must tell the trustee if you are involved in, or become involved, in family law property or spousal maintenance proceedings.  You must also disclose to the Trustee any family law property or spousal maintenance orders that you are a party to.

If you become bankrupt after the finalisation of family law property orders or spousal maintenance orders, the Trustee may apply to vary or set aside those orders.

6. What about transfers made pursuant to a Financial Agreement?  A Financial Agreement is a private agreement between two parties and therefore it can be set aside.  Creditors have standing to apply to set aside a Financial Agreement and the claw back provisions in the Bankruptcy Act can be used by the Trustee to recover property transferred pursuant to a Financial Agreement.  It is also an act of bankruptcy if you become insolvent due to a transfer of property in accordance with a Financial Agreement.

If you are in situation where you are the bankrupt spouse in a family law proceeding, we recommend you seek legal advice as this is a complex area of law.  You may contact our Family Law team at HHG who can provide advice tailored to your specific circumstances. 

This is only general information and does not constitute specific legal advice.  If you would like further information in relation to this matter or other legal matters please contact our office on Freecall 1800 609 945 or email us now.

If you are the spouse of a bankrupt (that is, a non bankrupt spouse) please refer to our article on Bankruptcy and the Non-Bankrupt Spouse. 
 

This is only general information and does not constitute specific legal advice.  If you would like further information in relation to this matter or other legal matters please contact our office on Freecall 1800 609 945 or email us now.

100 years of Supporting West Australians

"My family law experience with Mary Roubos has restored my faith in solicitors in general. She not only demonstrated her legal expertise and flair, but also showed a compassionate and understanding nature during the lengthy process. I felt that Mary went above and beyond her obligations as my solicitor, and really listened to me. I would highly recommend Mary and her assistant Debra Wilson, who also demonstrated professionalism and excellence on all levels."

Renee Frangiosa

"Always fast and thorough service. Thank you"

Sitka Pil

"I found Ben most helpful and always prompt to let me know where things were at. Will definately use Ben again and will recommend to others."

Gerrit and Mary Van Bralal

"We wish to express our thanks for your help in attending to our mother/ wife's will - Mrs Grace Margaret Vessey. Aimee was extremely helpful and easy to deal with. We are greatful for your help with our affairs."

Ms Rosalyn Norman, Mr Stephen Vessey

"Thank you ever so much for all your hard work on my case Nicole, I really appreciate everything you did for me."

Workers Compensation Client

"Thank you for such great assistance with the transaction of Flying Domestics on behalf of Lorna Good. It has been such such a pleasure to work with the HHG Legal Group and I look forward to working with you in the future."

Jim Goodwin

"Simon Creek and his team were at all times empathic, professional and confident.  My matter needed to be addressed within a pressing time frame, and their availability at short notice and contact after hours was much appreciated.  It caused me considerable stress, but having such a thoroughly reliable and competent team to call on helped me to feel in control. Although I hope not to need their services again in future, I would be confident in doing so!"

Dr Lana Bell

"A good outcome is what we can expect.  A great outcome is a sign of a company which does the very best for their clients. A very big thank you to Daniel Morris for showing empathy towards my small and much needed legal action.

To HHG Legal Group, thank you for a great outcome.  I would recommend your company to anyone seeking legal services."

Jan Atkinson

"Your support this morning was amazingly kind, not to mention your totally reassuring competence, knowledge and wisdom that you used on my behalf.  It was extremely reassuring to have your knowledgeable support, and I particularly appreciated your real and obvious kindness to me. It means so much at a very difficult time. I'm so grateful to you."

Family Law Client

"I highly recommend the services of HHG Legal Group for both personal and business needs. HHG is very up to date with legal advice and are in tune with the evolution of business."

Robert Forgione

"Sue and myself would like to thank HHG for the way in which our dispute was resolved. It is good to know that people who do not have an understanding of the legal system can rely on people like yourself and the company you represent. Without the assistance of HHG we could not have resolved the problems we were facing, not only have we resolved the issue but the outcome was more favourable then we would have thought possible. Thank-you and please pass on our thanks to all those who worked behind the scenes to achieve this outcome."

Rick and Sue Ashton

"Janene was very professional and we established a good rapport quickly. The subject of death and wills can be quite confronting to deal with, however Janene's approach was soft and accommodating."

Lynette Livesey

"A big thank you to HHG for their professional service, continued support, and wide range of legal knowledge. Our clients have given us nothing but kind words regarding HHG Legal Group and so we have no hesitation in referring and recommending Simon Creek and HHG Legal Group for their outstanding services and legal expertise."

Nigel Plowman, Director at McKinley Plowman & Associates

"Simon is a friendly and practical legal advisor. I have received great feedback from the clients I have referred to him and his team at HHG Legal Group."

Richard Beal, Director at BDO

"Over the last few years, I have been impressed by Simon’s legal ability, management skills, entrepreneurial spirit, personal integrity and people skills. He appears to be that rare breed of lawyer – both knowledgeable and commercial."

Michael Malone, Founder of iiNet

"Our family has been a client of HHG Legal Group over many years and most recently in 2013 and February 2014.  Business has included drawing up of wills for three generations and preparing of probate for my father in law.

I would have no hesitation in recommending HHG Legal Group to anyone requiring such services."

Bernice Climie

"You should be congratulated for the manner in which your staff address clients and we found our dealings with your company, once again a very pleasant experience and we would like to truly thank you for your efforts."

Steve Harvey and Jane Powell

"HHG Legal were absolutely fantastic. Extremely responsive and brought calm to our chaotic family situation through their knowledge and caring attitude. Extremely professional from our very first contact with them and they expertly guided our family though the required legal process over almost a 12 month period."

Amanda Williamson

"Fantastic team! They really care about their client. Tim Colcutt is a 'go that extra mile' guy who gives his client his all. I can't recommend HHG and Tim enough."

Kerry Samson

"Anne Hurley has been such a valuable resource of information and advice, her wealth of knowledge is truly impressive and her ability to explain things in a way that makes them easily understood is very much appreciated. Anne and the wider HHG Legal Group are always a pleasure to work with."

Giorgia Parham

"I had a fantastic lawyer in Anne Hurley. She helped me out a great deal with good, sound advice in a friendly , professional manner. First class, thanks Anne"

Graeme Hammond

"Marine Plant Systems has been working with HHG Legal Group for a few years now and they continually provide first class service. Their professional advice has been invaluable to our company."

Carolin Grimm

"We were kept up to date at all times. Pricing was always updated over the time period so we remained "in budget". Personal access to someone whenever I had questions. All in all a great experience without too much fuss."

Rosslyn Tasker - COO AltusQ Pty Ltd

"Good service you can count on."

Miles Lee

"HHG Legal Group have provided outstanding support as I have taken the journey of buying a business, their professionalism is beyound reproach. Their assistance throughout the Due Diligernce process have been invaluable, I would fully recommend them."

Mark Armitage

"I have experienced how good the HHG Legal Group team are over the last 6 years and highly recommend them."

Lyn Hawkins

"Very friendly and efficient service - what a pleasure working with Anne."

Jacques Taylor

"I highly recommend Daniel from HHG Legal Mandurah. When dealing with a complicated legal property matter recently I was extremely impressed by Daniel's honesty and integrity and the legal advice I received. I am very happy with the service from HHG Legal."

Tony Walker