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NOTICE ALERT IN LIGHT OF COVID-19
WHAT WE PROPOSE AND HOW WE CAN ASSIST
At Watson & Watson our clients come first. Please be assured of our continued dedicated services to all current and new clients.
As we have done in the past, we will continue to offer alternative conferencing methods ie video conferencing, skype or telephone conferences. Reviewing of all documentation provided to us prior to any initial conference will be all inclusive of our set fee. Do not hesitate to contact Shereen Da Gloria on (02) 9221 6011 should you have any concerns.
The Bankruptcy Act (Cth) 1966 sets out the law of bankruptcy in Australia. A person can become a bankrupt if they are unable to pay their debts as and when they fall due. A person may become a bankrupt because a creditor has served a Bankruptcy Notice and then filed and pursued a Petition for Bankruptcy in the Federal Court. A person can also present a Debtors Petition to the Insolvency in Trustee Service of Australia and become a bankrupt on their own application.
If one party to a marriage or a de facto relationship is a bankrupt or becomes a bankrupt there are consequences in Family Law Bankruptcy which will affect the way in which a Family Law matter proceeds as well as affecting the outcome. The costs of conduct of the proceedings and the length of the proceedings will also increase.
When a person becomes a bankrupt all of their property (except exempt property) vests in the Trustee in Bankruptcy (Section 58 Bankruptcy Act 1966). This means that they no longer own their property. The Trustee in Bankruptcy can replace the Bankrupt on title of the Bankrupt’s property. In cases where for example, a husband and wife own property jointly, the Trustee will become the co-owner of the property with the now bankrupt spouse.
The automatic vesting of property in the Trustee does not apply to exempt property which includes:
The right to commence proceedings for property settlement against the bankrupt spouse does not vest in the Trustee in Bankruptcy. Other provisions of the Family Law Act allow the Trustee to enter the Family Court proceedings. The Trustee cannot commence the proceedings and the Trustee is not automatically a party to property settlement proceedings. An action commenced by a person who later becomes bankrupt is stayed until the Trustee elects to prosecute or discontinue the action.
Section 79(11) of the Family Law Act provides that:
If the Section 79(11) requirements are met, the Family Court/Federal Circuit Court must join the Trustee as a party to the family law proceedings. The Trustee is not obliged to join the proceedings and can seek to be released from the proceedings if they object to continuing. The Trustee may not see any cost benefit in pursuing the Application.
In the event that one of the registered proprietors of real estate becomes bankrupt the intent of the Bankrupt in that property, vests in the Trustee and the Trustee goes on to title. The co-owners become the Trustee in Bankruptcy and the new Bankrupt spouse. The dynamic of the ownership has been changed. The Trustee will attempt to move as much of the assets as are available into the Estate of the Bankrupt. The interests of the Creditors will be most important to the Trustee – not the interests of the spouse.
If you are faced with a spouse or partner becoming bankrupt or you are facing bankruptcy and are proposing to enter into financial/property settlement with your spouse or partner and have and concerns as to how this will affect your property/financial settlement outcome, please contact Richard Watson Senior Family Lawyer or Shereen Da Gloria his Personal Assistant to discuss your concerns and seek timely advice.
This is only a preliminary view and is not to be taken as legal advice without first contacting Watson & Watson Solicitors on 9221 6011.
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