My house

When you become bankrupt, your Trustee can claim your share of any land, or land with property on it (real property). Your Trustee becomes the owner of your share of all real property and must consider how to best deal with that share.

To make this determination the Trustee must investigate:

  1. The value of entire piece of real property (not just your share)
  2. Who the co-owners are
  3. How much you owe to creditors
  4. The creditor and co-owners intentions

Your Trustee can make a claim against your share of real property even if there is no equity. However, if the co-owner is not bankrupt, your Trustee cannot make a claim against a co-owner’s share.

Your share of the real property may have to sold. The property may be sold on the open market (through a real estate agent) or the Trustee may consider selling your interest to a non-bankrupt person you know e.g. a co-owner.

If you fall behind with your mortgage repayments, the bank may also sell your property. If the sale price is not enough to pay out the debt, the shortfall can be listed in your bankruptcy.

You should also be aware that your Trustee will continue to own your share of real property even after your bankruptcy ends. This may occur if there was not enough equity in the property during your bankruptcy, or a non-bankrupt third-party e.g. a co-owner hasn’t purchased the Trustee’s interest. The property will continue to be owned by the Trustee (for the benefit of your bankrupt estate) for 6 years from the date your bankruptcy ends. After the 6 years have passed, the Trustee may continue to apply to extend the ownership period, resulting in your interest vesting indefinitely until it becomes commercially feasible for the Trustee to sell it.

My car

The vehicle you use as your main kind of transport, for ordinary daily activities such as travelling to work, is protected as long as the value of the vehicle is below a set amount. The value of the vehicle is what you would get if you sold it today (not the price you paid for it). If you are paying off a loan for the vehicle, the value is what you would get if you sold it today, less the amount owed to the creditor who loaned you the money (the equity). If the value of your main vehicle is above the set amount, your Trustee can claim and sell it. The Trustee would then refund you the set amount from the proceeds of the sale and use the remainder to repay some of your debts. You can use the refunded money to purchase another vehicle, provided it is not worth more than the set amount.

The Trustee can claim your other vehicles which are not being used for your main mode of transport, even if they are under the set amount. This includes cars, motorbikes, trailers, boats, caravans and motorhomes.

If your vehicle is under finance, and the value is less than the set amount, you should contact the creditor and discuss whether you intend to keep up the repayments during your bankruptcy. If you don’t continue the repayments the creditor is able to repossess the vehicle. If this happens you should tell the trustee so that the debt can be listed in your bankruptcy.

If you own your vehicle jointly with another person, the value of the vehicle is your share of the equity. For example, if you and your partner jointly own a car worth $14,000, your share of the value is $7,000. If your share is more than the set amount, the Trustee could ask your partner to purchase your share. If this can’t be done, the Trustee can claim and sell the vehicle and share the proceeds of the sale between your partner and the Trustee. The Trustee uses their share of funds to repay some of your debts. You would receive a refund of the set amount from the Trustee’s share of the sale proceeds.

If you are using a vehicle owned by someone else the Trustee will need to assess who owns the vehicle. The use of the vehicle may be considered a benefit in your bankruptcy. The value of the benefit will be calculated and added to your income. If the value of the benefit increases your income over the set amount, you will be required to make compulsory income payments.

My tools for work

The tools you use to earn your income are protected, as long as the value of the tools is below a set amount. The value of the tools is what you would get if you sold them today (not the price you paid when buying them). If the value of your tools is above the set amount, your Trustee is able to claim and sell them. The Trustee would then refund you the set amount from the proceeds of the sale and use the remainder to repay some of your debts.

My household items

You can keep most ordinary household items of reasonable value e.g. furniture and appliances.

My partner’s possessions

Your partner does not have to go bankrupt if you enter bankruptcy. But your bankruptcy may affect your partner if:

  • you sold or gifted them an asset prior to your bankruptcy
  • you and your partner jointly own an asset that the Trustee can claim (e.g. a vehicle or a house)
  • they use an asset that you own
  • they share a debt with you (e.g. a mortgage or phone bill)
  • they share a joint bank account with you

Your Trustee will be able to claim your share of the asset e.g. if you have a bank account in joint names, the Trustee can claim half of the funds in the account.

If your partner is also entering into bankruptcy the Trustee will have an interest in the full amount of the jointly owned assets.

If you helped your partner to buy any of assets e.g. a house or a car, the Trustee may claim an interest in those assets.