The Law Handbook 2024

372 Section 5: Managing your money from the date on which the person became a bankrupt; 3 for property that is acquired after the bankruptcy and disclosed to the trustee prior to discharge – six years after discharge; and 4 for property that is acquired after the bankruptcy and disclosed after discharge – six years after disclosure. The trustee can extend the six-year period referred to above by giving the bankrupt written notice within the six-year period. The notice can extend the period for up to three years. There is no limit on the number of extension notices that a trustee might give. Challenging a trustee’s claim to equity in a property that has increased in value after the date of the bankruptcy Depending on the facts, a discharged bankrupt might be able to defeat a trustee’s claim for equity built up in a property after bankruptcy. For example, if the trustee allowed bankrupts with no equity in their property to remain in the property without properly explaining to them that the trustee could later claim the property, the trustee’s behaviour may amount to a representation that the trustee was no longer interested in the property and had abandoned it to the bankrupts. Family Court issues Where a bankrupt is involved in family law property or maintenance (financial support) proceedings, the Federal Circuit and Family Court of Australia must, on the application of the trustee, join the trustee to the proceedings if the court is satisfied that the interests of the bankrupt’s creditors may be affected by the proceedings (see Part VIII FL Act). Once the trustee becomes a party to the proceedings, the bankrupt is not entitled, without the court’s consent, to make any submissions in relation to any property that is vested with the trustee (see Part VIII FL Act). The court is required to consider the effect of any proposed order on the creditors’ ability to recover a debt when making family law property orders. Where a person becomes bankrupt after the finalisation of family law property or maintenance orders, the trustee may also apply to vary or set aside those orders (s 79A FL Act). A bankrupt is obliged to tell the trustee if they are involved in family law property or maintenance proceedings. They must also disclose to the trustee any family law property or maintenance orders that they have been a party to. The above information also applies to a person who has entered into a personal insolvency agreement under Part X of the Bankruptcy Act. Non-bankrupt spouse contributed more than 50 per cent of sale price and/or mortgage repayments Get advice, as the non-bankrupt spouse might be able to claim more than 50 per cent of the property. When can’t the trustee sell the bankrupt’s house? The trustee cannot sell a bankrupt’s house if: • the bankrupt bought the house with ‘protected money’; or • the house is subject to a Defence Service Homes Mortgage. ‘Protected money’ is defined in s 116(2D) of the Bankruptcy Act. Protected money includes money received as damages for personal injuries, money received through a rural adjustment scheme, and superannuation money received after the date of bankruptcy (subject to the regulations referred to above under ‘Superannuation’). Property of a non-bankrupt spouse Jointly owned property If there is jointly owned property (e.g. a joint bank account) the trustee will try to find out the contribution to the property and then claim the proportion contributed by the bankrupt. Property in the sole name of the non-bankrupt spouse Where the bankrupt has made no contributions to the purchase of the property If the non-bankrupt spouse has property in their own name (e.g. money in the bank, a car) and this property has been purchased without the aid of the bankrupt, the trustee cannot take that property. Property transferred by the bankrupt prior to bankruptcy The trustee can sometimes claim property that is in the name of the non-bankrupt spouse (or another