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Bankruptcy & Property Transfers

12
Mar

Bankruptcy & Property Transfers

Tuesday, March 12, 2019

Broadly speaking, Australia’s bankruptcy laws are based on the Elizabethan statute of fraudulent dispositions, written in 1570.

That’s not to say changes and Parliamentary amendments haven’t been made over the past 450 years, but if you’re in business, own a home and facing bankruptcy, there are options.

In many cases, it’s often the small operator who finds themselves in the position where personal liability for substantial debts outweigh their capacity to repay the debts in full.

Unable to pay down what they owe, thoughts can turn to declaring bankruptcy and with it the concept of losing assets such as the family home.

So, it’s not surprising that people will sometimes do whatever it takes avoid bankruptcy - unfortunately, transferring assets such as a home to a spouse or relative at well below market value in an attempt to put the property out of the reach of creditors could lead to even bigger moral and legal consequences.

Proper structuring is the best way to protect your home when it comes to structuring business outcomes. Unfortunately if you have already accrued debts which you can’t pay, it’s usually too late to consider these measures - but you still have options.

While you may need to refinance or sell your home to pay your debts, the alternative of having a trustee sell your property is usually a last resort, so understanding how to navigate your way through sometimes turbulent fiscal waters before things become unmanageable is crucial.

Firstly, never rely on hearsay or the word of an unqualified advisor who suggests simply transferring your interest in the property to someone else.

While, this seems relatively straightforward, where property is treated in this way, the transfer is often considered void if not done in accordance with regulatory timeframes. Trustees can also feasibly reverse the transaction to recovery outstanding debts - not to mention potential criminal ramifications.

Refinancing, negotiated settlements or repayment by instalments (if sufficient funds aren’t available) are just a few of the options which should be first looked at.

The most important thing is get independent expert advice as to what the most appropriate insolvency options are, and not a turn to a Google search for your next move.

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Tuesday, March 12, 2019

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