ACT Changed Financial Circumstances After Bankruptcy

[DPG]

Hello,

In October 2013, my former wife filed for Bankruptcy following a Court Order to pay me money from our divorce settlement. At this time she was not working and had no other income.

Her personal situation has now significantly changed. She has a job and has re-married at the beginning of 2015.

I have two questions:
1. Does her change of circumstance mean that the trustee can do a re-assessment and claim some of her income, or new marital assets?
2. Her list of Creditors on the bankruptcy notification incorrectly specified money as being owed to me, but the Court order states that it is owed to my mother. My mother is not listed as a creditor. After the 3 year period is over, can my mother seek to recover the money owed to her?

 

[Tracy B]

Hi DPG,

Bankruptcy can ender under three circumstances:

1. Court annuls the bankruptcy (meaning, the person never should have entered into bankruptcy in the first place);
2. All debts are paid; or
3. The bankruptcy agrees with its creditors and enter into a section 73 proposal.

A change in financial circumstance within the 3 years will not entitle you (as a creditor) to apply for discharge of the bankruptcy. This is because the law gives a person 3 years to get back on track. This will ideally involve the bankrupt person's financial circumstances improving within this time. To allow a creditor to apply for discharge would defeat one of the main points of bankruptcy, which is to bar actions from creditors so as to allow the bankrupt person a better change to re-arrange their finances and become financially healthy again.

If your mother has a court order stating the money goes to her, then she can apply to the trustee now to have her name added to the list of creditors. Otherwise, she can do this after the bankruptcy has been discharged. It is automatically discharged 3 years after commencement unless the person applies for an extension and it is granted by court.

 

[DPG]

Hi Tracy B. Thanks very much for your reply.

With regards to the second point regarding my mother as a creditor, my question actually is related to the action she can take after the bankruptcy has been naturally finished after 3 years. In other words, as she is not listed as a creditor on the bankruptcy, when my ex-wife is no longer bankrupt after 3 years, can my mother seek to recover the funds through the courts?

 

[Tracy B]

Your mother already has a court order against her. To enforce this, she can apply for an enforcement order after the bankruptcy period ends. However, the court will probably ask her why she did not contact the trustee and alert them to her debt? She could be seen as trying to circumvent the bankruptcy to get more money than had she been a listed creditor. I doubt the courts will like this very much.