The Law Handbook 2024

368 Section 5: Managing your money bankrupt (ss 156A, 157). It can be an advantage for a debtor to not have a private trustee, as the trustee’s fees can be significant. What happens to a bankrupt’s property? Divisible property Property that can be taken by the trustee is called ‘divisible property’. This includes houses, land, and motor vehicles worth over $9100 (as at October 2023). The general rule is that all property owned by the bankrupt at the time of the bankruptcy, or acquired during the bankruptcy, is divisible or ‘vests in’ the trustee (s 116(1)(a) Bankruptcy Act). This means that the trustee becomes the legal owner of the property, and has a duty to sell the property so that the proceeds can be distributed to creditors. The trustee will also sell any part share that the bankrupt has in jointly owned or mortgaged property. Non-divisible property The Bankruptcy Act (s 116(2)) and the Bankruptcy Regulations (Property available for payment of debts, Part 6 Div 3) list the property that the trustee cannot take from a bankrupt. Non-divisible property includes: 1 necessary household property (e.g. beds, fridges); 2 property the bankrupt uses to earn income, such as tools of trade, plant and equipment, professional instruments and reference books of the bankrupt to the value of $4200 (as at October 2023), and such other items of the same nature as the creditors or the court might allow; 3 one or more motor vehicles that do not exceed the value of $9100 (as at October 2023) to ensure that the bankrupt has transport during the bankruptcy. This is the auction value of the vehicle. If the vehicle is worth more than this, the trustee can take the vehicle but must refund the bankrupt $9100 (see ‘Keeping a mortgaged car during the bankruptcy’, below); 4 the interest of a bankrupt in a regulated superannuation fund, or a payment from such a fund received on or after the date of bankruptcy, if the payment is not a pension; 5 the proceeds of certain damages claims for compensation, and any property purchased with the proceeds of such a claim; 6 policies of life insurance or endowment assurance in respect of the life of the bankrupt or the bankrupt’s spouse, or the proceeds of such policies that are received on or after the date of bankruptcy; 7 the amount of money a bankrupt holds in a retirement savings account ( RSA ), as defined in the Retirement Savings Accounts Act 1997 (Cth) (‘ RSA Act ’), and any payment to a bankrupt from an RSA received on or after the date of bankruptcy if the payment is not a pension; 8 money paid by way of loan or grants through certain government rural support schemes, generally where the money was for household support or rehabilitation; 9 a payment to the bankrupt under a payment split under Part VIIIB (Superannuation Interests) of the Family Law Act 1975 (Cth) (‘ FL Act ’) where the eligible superannuation plan involved is a regulated superannuation fund or an RSA and the payment involved is not a pension under the Superannuation Industry (Supervision) Act 1993 (Cth) or the RSA Act; and 10 any property that, under an order under Part VIII (Trustees) of the FL Act, the trustee is required to transfer to the spouse of the bankrupt. Market value of divisible property When considering whether to seize and sell certain assets, the trustee must have regard to the costs of seizing and selling the asset in relation to the item’s value (e.g. reg 27(4)(e) Bankruptcy Regulations). The trustee must also have regard to any special or health or medical needs of members of the bankrupt’s household and whether the property is reasonably necessary for the functioning of the bankrupt’s household (reg 27(4)(b)(d)). Property acquired during bankruptcy The trustee can take any divisible property the bankrupt acquires after the date of becoming bankrupt and before being discharged. This might include: • property given to the bankrupt; • property won by the bankrupt (e.g. Tattslotto); • property inherited by the bankrupt; or • mortgaged goods paid off during bankruptcy.