NSW Ex Declared Bankruptcy - Go Through Property Settlement to Get House Back?

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19 April 2016
This is both Bankruptcy and Family Law related.

My ex declared bankruptcy while we were separated and we have now been divorced. No property settlement has been done through the courts yet. I have until September 2016 to do this.

Due to her bankruptcy the Public Trustee (AFSA) now has 50% of my house. I have made one offer to purchase it back from AFSA which was rejected. I have significant debt left from the marriage and the house is in a negative equity situation so the trustee is not going to sell the house.

What is the best way to get the house back? Do I go through the court with my ex for a property settlement? Can the court award her half of the house to me and force AFSA to turn it over to me or is my only option to give in to AFSA and pay whatever they dictate.

What happens if I do nothing?


Hi grey,

the Family Court has jurisdiction in any matter connected with, or arising out of, the bankruptcy of a party to a marriage in proceedings for a property settlement.

Generally what happens is that instead of jsut you and your ex being parties to the application, the trustee and /or creditors will also be involved. The court will then determine each parties entitlement (your ex's entitlement generally being that of the trustee except where it relates to assets that are exempt from the bankruptcy) by the following 5 steps:
  1. Ascertaining the parties’ property by determining legal and equitable interests in property and liabilities.
  2. Determining whether it is just and equitable to make an order altering the parties’ “existing interests” both legal and equitable.
  3. If it is found just and equitable to alter the parties interest, assessing the parties’ financial and non-financial contributions.
  4. Ascertain if, after considering the above, it is necessary to make an adjustment for the future needs of the parties
  5. Determining what orders would be just and equitable.
As a non-bankrupt spouse you may claim against the assets collected by your ex's bankruptcy trustee and bring an injunction application against the trustee to prevent him from selling the property. The Court will have the power to grant an injunction against a bankruptcy trustee preventing the trustee from distributing dividends to the creditors of your ex.