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Transactions to Defeat Creditors

If a person enters into a transaction (prior to becoming bankrupt) with the prime purpose of the transaction is to defeat creditors (ie keep the money or property out of the reach of their creditors) then in certain circumstances the transaction (after bankruptcy) can be set aside by the Bankruptcy Trustee.

There is no time limit involved under this section. The trustee can void transactions made at any time before the bankruptcy, as long as the conditions as set out in the Bankruptcy Act have been met.

Private Registered Bankruptcy Trustee

A Private Registered Bankruptcy Trustee is a qualified insolvency specialist. Usually they hold a university degree in accountancy or commerce and are either members of the Institute of Chartered Accountants or CPA Australia. A Registered Trustee may also be a member of the Insolvency Practitioners Association of Australia.

All Registered Trustees must be registered with the Insolvency and Trustee Service Australia (ITSA) and are regularly monitored and audited by ITSA.

A Registered Trustee can undertake a Debt Agreement, Personal Insolvency Agreement, or Bankruptcy.

Debt Free has a Registred Trustee who can administer your Bankruptcy, Debt Agreement or Personal Insolvency Agreement. Call today for a fee estimate to administer your bankrupt estate.

Preference Payments

Preferences are payments or transfers that may be recovered by a Bankruptcy Trustee, in other words you must first become bankrupt before your Trustee could seek to recover any preference payment from any of your creditors. Only payments can be recovered where it can be established that the creditor received a preference or advantage over other creditors. In other words the Bankruptcy Trustee must be able to establish that the creditor received more (prior to bankruptcy) than what they would have received from the distribution in the bankruptcy. The Trustee in Bankruptcy must be able to prove that the person making the payment (ie the person that later became bankrupt) was insolvent when they made the payment. Preference Payments can only be recovered with a Court order (unless an out of Court settlement is agreed between the creditors and the Bankruptcy Trustee).

188 Authority

The 188 Authority initiates the process for a Personal Insolvency Agreement. A 188 Authority is irrevocable and upon signing a 188 authority, you commit an act of bankruptcy, which means if your proposal fails it will assist your creditors in petitioning for your bankruptcy (ie your creditors will not need to reply upon any other act of bankruptcy if they petition for your bankruptcy). For that reason is important that you put forward your best possible proposal.
Once you sign a 188 authority, your Controlling Trustee will have full control over your property. This control will continue until one of the following events occur:

  • the creditors resolve that the property is no longer subject to the control of the Controlling Trustee; or
  • a Personal Insolvency Agreement is executed by the debtor following the resolution of creditors, at which time the control is transferred to the trustee who will supervise the Personal Insolvency Agreement; or
  • a period of four (4) months has elapsed from the time of the authority being accepted; or
  • the Court releases the debtor’s property; or
  • the debtor becomes a bankrupt or dies.

Your Controlling Trustee will have power to deal with your property and will have the ability to:

  • take immediate control of your property;
  • make such enquiries and investigations in connection your affairs;
  • carry on your business (if you a sole trader or in partnership); and
  • deal with your property in way that will, in the opinion of your Controlling Trustee, be in the interests of creditors.

In addition, the Controlling Trustee will be required to:

  • notify your creditors that a s188 authority has been signed;
  • give information about the administration of your estate to any creditor who reasonably requests it;
  • ensure that you discharge your duties under the Bankruptcy Act; and

give consideration to any offences you may have committed under the Bankruptcy Act and refer any offences to ITSA’s Bankruptcy Fraud area for prosecution.

Controlling Trustee

What is a controlling trustee?

A Controlling Trustee is a qualified insolvency specialist. Usually a Registered Trustee or a Solicitor is appointed as a Controlling Trustee. The Controlling Trustee must investigate the affairs of the debtor and prepare a report to creditors. The report to creditors must make a recommendation on the proposed Personal Insolvency Agreement and must compare the estimated return under the Personal Insolvency Agreement to bankruptcy. The Controlling Trustee must also call the meeting of creditors so the creditors can vote on the Personal Insolvency Agreement proposal.

The time period that a Controlling Trustee will act is from the date the 188 Authority is signed up until the meeting of creditors is held. If the Personal Insolvency Agreement is accepted by creditors, a Registered Trustee must supervise the agreement.

What you need to know about appointing a controlling trustee?

You should be aware that signing the 188 Authority is irrevocable and once you sign a 188 authority, your Controlling Trustee will have full control over your property. Call Debt Free today to find out more about appointing a controlling trustee – our initial phone consultation is free and all information disclosed is entirely confidential.

Implications of signing a 188 Authority

Once you sign a 188 authority, your Controlling Trustee will have full control over your property. This control will continue until one of the following events occur:

  • the creditors resolve that the property is no longer subject to the control of the Controlling Trustee; or
  • a Personal Insolvency Agreement is executed by the debtor following the resolution of creditors, at which time the control is transferred to the trustee who will supervise the Personal Insolvency Agreement; or
  • a period of four (4) months has elapsed from the time of the authority being accepted; or
  • the Court releases the debtors property; or
  • the debtor becomes a bankrupt or dies.

Your Controlling Trustee will have power to deal with your property and will have the ability to:

  • take immediate control of your property;
  • make such enquiries and investigations in connection your affairs;
  • carry on your business (if you a sole trader or in partnership); and
  • deal with your property in way that will, in the opinion of your Controlling Trustee, be in the interests of creditors.

In addition, the Controlling Trustee will be required to:

  • notify your creditors that a s188 authority has been signed;
  • give information about the administration of your estate to any creditor who reasonably requests it;
  • ensure that you discharge your duties under the Bankruptcy Act; and

give consideration to any offences you may have committed under the Bankruptcy Act and refer any offences to ITSA’s Bankruptcy Fraud area for prosecution.

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