The Bankrupt’s Property
There is some property which is protected when a person declares bankruptcy.
Section 116 of the Bankruptcy Act 1966 (Cth) sets out which property creditors can take to pay debts owed by a person declaring bankruptcy.
The property which the Section lists as being exempt is:
- Any property which the bankrupt holds in trust for another person (this means where the bankrupt is the trustee of a trust) and;
- The bankrupt’s household property (the term household property is defined below) and;
- Personal property that has sentimental value for the bankrupt person and;
- Personal property (as defined below) and;
- Cars or motorbikes to the value of $8,100, this value is updated each year and may have increased, you can view the exact value here and;
- Life insurance policies and;
- Superannuation and;
- Payments for a personal injury and;
- Certain payments made under the Family Law Act and;
- A compensation payment owed to the bankrupt person and;
- A payment made to the bankrupt under the National Redress Scheme for Institutional Child Sex Abuse Act 2018 (Cth) and;
- Payments made under a rural redress scheme and;
- Support funded by the National Disability Insurance Scheme Act 2013 (Cth).
Subsection (2) of Part 6.03 of the Bankruptcy Regulations 1996 (Cth) states a bankrupt person can keep household property which is: “reasonably necessary for the domestic use of the bankrupt’s household, having regard to current social standards.”
This leaves it open to argument exactly what possessions are beyond the reach of creditors when a person declares bankruptcy.
The Regulations then state that while it remains open for a person to argue certain property is necessary for domestic use certain items are definitively off-limits.
This list includes:
- Sufficient household furniture and;
- Beds for members of the household and;
- Education, sporting and recreational items and;
- One television set and;
- One radio and;
- One washing machine and one clothes drier and;
- One fridge and one freezer and;
- One telephone and;
- One video recorder.
The above information is not a substitute for legal advice. If you have declared bankruptcy and creditors are trying to take your property you should seek legal advice.