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Mitchell is the Managing Principal of Sharrock Pitman Legal. He is an Accredited Specialist in Commercial Law (accredited by the Law Institute of Victoria). He also deals with areas of Employment Law, Wills & Estate Planning and Probate and can answer all your questions related to probate.

For further information, contact Mitchell on his direct line:


CALL: (03) 8561 3318

Personal Insolvency occurs when a person is unable to pay their debts as and when they fall due. Litigation Lawyer Nicola Voss explains what happens next.

Bankruptcy

Bankruptcy is the legal process and status that a person has under the Bankruptcy Act 1966 (Cth). An individual becomes bankrupt either voluntarily or involuntarily. Upon bankruptcy, property owned by the bankrupt vests with the Official Trustee in Bankruptcy or a trustee that is registered under the Bankruptcy Act 1996 (Cth). For more information about bankruptcy generally, please see our article titled A Guide to Bankruptcy.

What happens after I am declared bankrupt?

As noted above, a trustee in bankruptcy will be appointed to deal with your assets. The period of bankruptcy is usually three years and one day, however this may be extended upon application to the Court by the trustee.  

Your assets include property held at the start of the bankruptcy and those that you have acquired during bankruptcy. Further, certain property that you may have disposed of prior to bankruptcy can also be recovered by the trustee in bankruptcy in some circumstances.  

Role of the trustee

The trustee’s role in bankruptcy proceedings is to recover and sell property and distribute those proceeds to creditors who are owed money by the bankrupt.  

What are the main consequences of bankruptcy?

Although bankruptcy can provide relief to a person who is unable to pay their debts, there are a range of significant consequences that you should be aware if you are considering a voluntary bankruptcy. Some of these consequences are as follows:

1.    Ownership and control of property

Once you are declared bankrupt, most divisible property owned at the time of bankruptcy or acquired after bankruptcy vests in the trustee. Common types include shares, real estate, vehicles and fixtures and fittings as well as rights or powers over property that existed at the date of bankruptcy or during the bankruptcy. Further, if you earn over a specific amount (as set each year), then you may need to make compulsory payments to the trustee.

2.    Overseas travel  

In some situations, the trustee will require you to forfeit your passport until your bankruptcy period has finished.  However, in all situations, you will be required to obtain written permission from the trustee should you wish to travel overseas.

3.    Disclosure of bankruptcy and impacts on ability to obtain credit and future employment

Disclosure of your bankruptcy

Unless you tell the other party that you are an undischarged bankrupt (i.e. during their bankruptcy period), you cannot:

(a)  obtain credit, such as a loan from a bank over a set amount;

(b)  enter into a contract or agreement for the hire or lease of any goods (such as a car) over a set amount;

(c)  promise to pay for goods over a set amount;

(d)  obtain money from someone by promising to supply goods or services over a set amount; and

(e)  carry on a business under another name either alone or in partnership or under a firm name, without disclosing to all those people involved that you are an undischarged bankrupt.  

Impacts on obtaining credit and future employment

As your name will be permanently recorded on the National Personal Insolvency Index, a future employer or bank may search this register to find out whether you are currently bankrupt or have ever been bankrupt. This will likely impact future job prospects and impede obtaining finance (such as loans). Further, you will be disqualified from managing a company (including being a director or secretary of a company) for the duration of your bankruptcy.

4.    Not all debts are wiped

Some people believe that once they enter bankruptcy, all of their debts are ‘wiped’ or ‘covered’ and they do not need to repay them.

This is not the case with all debts, such as HECS & HELP debts, child support and maintenance contributions, court imposed penalties and fines, debts incurred after the bankruptcy begins, overseas debts and company debts. This also includes where a debt is tied to a property (such as a house by way of mortgage), as this creditor will be a secured creditor.  In this situation, you will need to assist the mortgagee in recovering monies owed.

These are only some of the consequences of entering bankruptcy. For further information about bankruptcy, we recommend visiting AFSA’s (Australian Financial Security Authority) website.

How Sharrock Pitman Legal can help?

For legal advice regarding bankruptcy, including if you have been served with a bankruptcy notice or are considering voluntary bankruptcy, please contact our litigation team on (03) 9560 2922 to speak to one of our lawyers or email sp@sharrockpitman.com.au.

The information contained in thisarticle is intended to be of a general nature only and should not be reliedupon as legal advice. Any legal matters should be discussed specifically withone of our lawyers.

Liability limited by a scheme approved underProfessional Standards Legislation

Written by a member of our Legal Team

,

.

Nicola Voss

For further information contact

Nicola Voss

Nicola Voss is a lawyer at Sharrock Pitman Legal.

She is a lawyer in our Litigation practice. For further information, contact Nicola on her direct line (03) 8561 3315.

More on

Litigation [Courts & Tribunals]

Personal Insolvency occurs when a person is unable to pay their debts as and when they fall due. Litigation Lawyer Nicola Voss explains what happens next.

However, in this article we will set out the factors that influence how long it will take to obtain a Grant of Probate and to administer an estate in Victoria.

The basics

First things first: what is a Grant of Probate? A Grant of Probate is effectively a document issued by the Supreme Court of Victoria which formally authorises an executor to manage the estate of a deceased person in accordance with their Will. Without Probate, the asset holders (say a bank or share registry) cannot be satisfied as who has the correct authority to receive the deceased's assets and may refuse to pay out.

Sometimes, for smaller estates or if assets are mostly jointly owned with a surviving spouse, asset holders might agree to release payment without requiring a Grant of Probate. This is usually on the basis that the person who receives payment promises to repay (or Indemnify) the asset holder if it turns out they paid to the wrong person.

If there is no Will, then you cannot obtain a Grant of Probate. Instead you obtain Letters of Administration. This is effectively the same, in terms of authorising someone to administer the estate, and would usually be obtained by the person who is the closest next-of-kin to the deceased.

“A Grant of Probate is effectively a document issued by the Supreme Court of Victoria which formally authorises an executor to manage the estate of a deceased person in accordance with their Will.”

Timeframes for Probate in Victoria

In order to obtain a Grant of Probate, the Supreme Court needs to be given information about the assets and liabilities of the estate, the deceased person, the witnesses to the Will, the executors and the Will itself. An advertisement of your intention to apply for Probate must also be published on the Supreme Court website for at least 14 days prior to any application being lodged.

Often, making enquires to obtain all the necessary information can take a number of weeks. Also, you will need the Death Certificate for the application for Grant of Probate and possibly for making proper enquires regarding the assets and liabilities. Waiting for the Death Certificate to issue can therefore add a few more weeks to the process. Overall, if you have your application for Grant of Probate lodged within 1 to 2 months from the date of death, you are making timely progress.

The Court itself usually does not take long to process the application (maybe another 1 to 2 weeks) and this is completed using the electronic Supreme Court filing system. This means you do not have to go to a Court hearing. The timeframe for processing applications for Letters of Administration is even less, given that there is no Will document for the Court to consider. There is also a general discretion for the Court to raise a 'Requisition' asking for more information before they review the application - this can sometimes delay matters.

“Overall, if you have your application for Grant of Probate lodged within 1 to 2 months from the date of death, you are making timely progress.”

So, here we are a few months after death and you finally have a Grant of Probate or Letters of Administration. It is important to remember that this is the start of the estate administration and not the end. For a very simple estate, you might only need a further month or so to cash the assets and pay them to the correct beneficiaries. However, it can often be more complex than that. Factors that determine the timeframe to administer the estate include:-

  • Some assets will take time to cash or transfer. For example, if selling a property, final settlement might be 60/90/120 days from the day of sale.
  • There is a 6 month period for challenges to be brought against the estate and executors must wait until this period expires before distributing the estate, if there is any risk that a disgruntled family member might come forward.
  • There might need to be final tax returns for the deceased or for the estate. Failing to wait for the ATO to process these could leave the executor personally liable for a tax bill.
  • You might need to advertise for creditors to come forward and wait for a period of months while this advertising timeframe expires. This protects the executor if they are unsure of all of the deceased's financial dealings and creditors.
  • It might not always be a good time to immediately cash estate assets. For example, the shares just took a nose-dive, do you still sell regardless of available price?

There is a general rule that executors have an 'executor's year' to complete the estate administration. This means that you should be aiming to have the estate finalised and distributed within 12 months from the date of death.

The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.

Liability limited by a scheme approved under Professional Standards Legislation.

Need help with Probate?

Our expert legal team is ready to take your call!

Mitchell is the Managing Principal of Sharrock Pitman Legal. He is an Accredited Specialist in Commercial Law (accredited by the Law Institute of Victoria). He also deals with areas of Employment Law, Wills & Estate Planning and Probate and can answer all your questions related to probate.

For further information, contact Mitchell on his direct line:

DIRECT LINE: 
(03) 8561 3318

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About Sharrock Pitman Legal

For fifty years Sharrock Pitman Legal has made a significant and long term contribution to meeting the legal needs of business owners and residents in the City of Monash and greater Melbourne area.