Background
An individual became bankrupt as they sought relief due to financial distress arising from a legal dispute with a former spouse over joint property ownership. The majority of creditors were linked to credit card debts incurred during the dispute. Outside of their ownership in the property, there were no other available assets for the bankrupt estate creditors.
Unfortunately, the individual was unable to continue funding any action against their former spouse as the creditors were starting to take action to recover their debts.
During the appointment, we faced challenges from unresponsive mortgagees, uncooperative actions by the former spouse, immediate Family Court applications, and valuation difficulties for the property. Legal complexities also arose regarding the impact of bankruptcy on family law, particularly superannuation of the bankrupt individual.
How we helped
Upon appointment as Trustee, the bankrupt’s interest in the property was transmitted to the Trustee. We then coordinated with the unresponsive mortgagees and were able to obtain responses that were required to negotiate any claims with the former spouse.
We engaged solicitors to act in the Family Court matters and responded to any and all actions commenced by the former spouse. As a consequence, after reviewing the individual’s financial position, we were then able to negotiate a settlement agreement with the former spouse in the form of a section 73 annulment proposal to creditors.
Outcome
The s73 proposal was accepted, annulling the bankruptcy and providing creditors with a 13.16 cents in the dollar dividend. The property’s equity was sold to the former spouse, resolving the matter without prolonged Family Court proceedings, reducing legal costs, and maximising returns to creditors. The individual was able to move on without any lingering debts, whilst not receiving any monies in return, all creditors received a return that might otherwise have been diminished throughout a bankruptcy and with an annulment, it was as if the bankruptcy never occurred.
