A Trustee in Bankruptcy must investigate the financial affairs of a bankrupt to establish if the bankrupt entered into transactions which would be void as against the Trustee in Bankruptcy.Sections 120, 121 & 122 of the Bankruptcy Act sets out the types of transactions which may be void as against the Trustee in Bankruptcy.

Undervalued Transactions

Section 120 of the Bankruptcy Act allows the Trustee to “claw back” certain transactions where that transaction involved a transfer of the bankrupt’s property for less than its value.

Transfers to Defeat Creditors

Section 121 of the Bankruptcy Act allows certain transfers of assets to be voided where that transfer was intended to prevent that asset from becoming available to creditors of the bankrupt estate. There is no time limit involved but the Trustee must be able to show that the bankrupt was, or was about to become, insolvent.

Preferential Payments

Section 122 of the Bankruptcy Act allows certain payments made to creditors within the 6 months before the commencement of the bankruptcy to be recovered by a Trustee, should those payments prove to be “preferential” to the recipients.

If you or your spouse are contemplating bankruptcy and you want to understand what transactions a trustee will a trustee investigate, then call us today on 1800 462 767 to discuss your options.

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