QLD Gift Assets to Spouse and Declare Bankruptcy?

[Warwick]

Can I protect my assets from legal cost recovery actions by gifting to my spouse and declaring bankruptcy?

 

[Sophea]

No. The Bankrupty Act has claw back provisions which entitle the trustee to take back those assets even if you have gifted them beforehand.

The trustee can claim property that the bankrupt transferred:

1. within four years prior to bankruptcy if the property was transferred for less than market value;
2. within five years prior to bankruptcy if the property was transferred for less than market value and the bankrupt was insolventat the time of the transfer; and
3. at any time prior to bankruptcy if the transfer was made with the intention of defrauding creditors.

Note: There will be a rebuttable presumption of insolvency for the purposes of point two, above, if the bankrupt failed to keep proper books, accounts and records during the time of the transfer or, if they did keep such account, failed to preserve them.

The trustee will also be able to recover the loss to the bankrupt estate where the consideration for the bankrupt’s property at the time of the transfer went to a third party other than the bankrupt.

http://www.lawhandbook.org.au/handbook/ch08s03s06.php