Save my home in Bankruptcy

Your home is your castle and contrary to popular belief, an insolvency practitioner can satisfy his duties as a Trustee and save your client’s castle. Numerous individuals discuss with me the impact of Bankruptcy on both their ability to live in their home and to invest in their future wealth position. I am convinced the right strategy implemented by the Trustee can put you or your client in a position where they can remain in their castle and even pay off their mortgage without later forfeiting the asset to the Trustee.
Such a strategy avoids the heart wrenching, costly and difficult task of removing an individual from their home.

If your client can raise funds within the relevant timeframe that would be greater than the surplus from the sale of the property to the open market, then the range of different vehicles used to provide your client with security in their home include:-

  • Deed of Transfer – Transfer to a related party.
  • Deed of Forebearance – Trustee agrees not to sell the property now and within the relevant timeframe for acceptable consideration.

A successful deed will not only bring a better return to creditors but also peace of mind to a bankrupt in addition to avoiding unnecessary relocation costs and taxes.

A blog on saving a home wouldn’t be complete without a warning regarding antecedent transactions (ie transferring a property to a third party like wife or son for under value). Should individuals enter into dubious transactions prior to going bankrupt a Trustee will investigate and likely void those transactions in effect removing any sense of security or future entitlement to you or your client’s home.

 

 

 

Save my home in Bankruptcy

Your home is your castle and contrary to popular belief, an insolvency practitioner can satisfy his duties as a Trustee and save your client’s castle. Numerous individuals discuss with me the impact of Bankruptcy on both their ability to live in their home and to invest in their future wealth position. I am convinced the right strategy implemented by the Trustee can put you or your client in a position where they can remain in their castle and even pay off their mortgage without later forfeiting the asset to the Trustee.
Such a strategy avoids the heart wrenching, costly and difficult task of removing an individual from their home.

If your client can raise funds within the relevant timeframe that would be greater than the surplus from the sale of the property to the open market, then the range of different vehicles used to provide your client with security in their home include:-

  • Deed of Transfer – Transfer to a related party.
  • Deed of Forebearance – Trustee agrees not to sell the property now and within the relevant timeframe for acceptable consideration.

A successful deed will not only bring a better return to creditors but also peace of mind to a bankrupt in addition to avoiding unnecessary relocation costs and taxes.

A blog on saving a home wouldn’t be complete without a warning regarding antecedent transactions (ie transferring a property to a third party like wife or son for under value). Should individuals enter into dubious transactions prior to going bankrupt a Trustee will investigate and likely void those transactions in effect removing any sense of security or future entitlement to you or your client’s home.

 

 

 

Trusts and Insolvency

With the recent decision in Condon v Lewis [2013] NSWCA whose basic facts involved:-
Allowing an appeal from a beneficiary of a trust (that was purportedly created to “deceive her (the bankrupt’s) former husband, the Family Court and to avoid tax”) primarily to ensure property was part of the Kenthurst investments Trust and to enable the bankrupt as appointer to appoint a Trustee who was not the Trustee in Bankruptcy.

It has reignited the debate in my mind around the difficulty of trusts in general and the uncertainty surrounding the steps to be taken by an insolvency practitioner who is appointed over a company or individual acting as Trustee.

One of the first issues is the practical power to sell the assets, (besides the commercial position of the property) is whether or not the practitioner needs court approval to sell the property.

Apostolou (the case of) – suggested that in circumstances where the trust instrument grants the power of sale and in conjunction with the general power of s477(2)(c), the liquidator may not need judicial orders to sell, given the issues in this particular matter stated in p 53 of the judgement:-

“VA Corporation had purported to transfer the property to Ms Apostolou The transfer had been lodged in the Stamps Office and had been assessed to duty. That assessment was being challenged. Second, Mr Vasiliou had informed the liquidators that VA Corporation had no right to remain as the registered proprietor of the property. Third, Mr Vasiliou also denied that the trustee had a right of indemnity. Fourth, Mr Vasiliou was making a variety of complaints about the liquidators’ conduct. Finally, the liquidators were acting on their solicitors’ advice regarding matters which were not legally straightforward.”

Even though it was not necessary, it was “proper”, for the liquidator to do so.

The Lemery Holdings case appears to take a different tact, with different facts it notes “It is also universally accepted that the only remedy of the trustee against the trust assets is judicial sale or appointment of a receiver”. Ie it is necessary for the insolvency practitioner to go to court.

Insolvency Practioners Remuneration and Disbursements

An issue close to most insolvency practioners hearts is the indemnity from trust assets for fees and how far that indemnity extends. Without going into too much detail, it appears to me that the court is generally favourable to the right of indemnity extending to the protection and realisation of trust assets (“protection umbrella”). See the case Re Suco gold.

The obvious question is then how many, if not all of the statutory tasks required by a liquidator would be accepted to fall under the protection umbrella. My thoughts are probably all, should any of the Liquidator’s statutory requirements not be completed (“from appropriately report to creditors to having the property valued”) it could put in jeapordy the liquidator’s position and ability to protect and realise the trust assets.

I am sure everyone has a different view on what is involved under the protection umbrella and would enjoy any thoughts from readers on the above.

I have to thank John Tanna and the team at Jones Partners as their thoughts are have provided significant input in the above. I would also like to apologize for my first blog being on quite a heavy reading topic, I will try to mix it up with a range of different matters in the future.

Trusts and Insolvency

With the recent decision in Condon v Lewis [2013] NSWCA whose basic facts involved:-
Allowing an appeal from a beneficiary of a trust (that was purportedly created to “deceive her (the bankrupt’s) former husband, the Family Court and to avoid tax”) primarily to ensure property was part of the Kenthurst investments Trust and to enable the bankrupt as appointer to appoint a Trustee who was not the Trustee in Bankruptcy.

It has reignited the debate in my mind around the difficulty of trusts in general and the uncertainty surrounding the steps to be taken by an insolvency practitioner who is appointed over a company or individual acting as Trustee.

One of the first issues is the practical power to sell the assets, (besides the commercial position of the property) is whether or not the practitioner needs court approval to sell the property.

Apostolou (the case of) – suggested that in circumstances where the trust instrument grants the power of sale and in conjunction with the general power of s477(2)(c), the liquidator may not need judicial orders to sell, given the issues in this particular matter stated in p 53 of the judgement:-

“VA Corporation had purported to transfer the property to Ms Apostolou The transfer had been lodged in the Stamps Office and had been assessed to duty. That assessment was being challenged. Second, Mr Vasiliou had informed the liquidators that VA Corporation had no right to remain as the registered proprietor of the property. Third, Mr Vasiliou also denied that the trustee had a right of indemnity. Fourth, Mr Vasiliou was making a variety of complaints about the liquidators’ conduct. Finally, the liquidators were acting on their solicitors’ advice regarding matters which were not legally straightforward.”

Even though it was not necessary, it was “proper”, for the liquidator to do so.

The Lemery Holdings case appears to take a different tact, with different facts it notes “It is also universally accepted that the only remedy of the trustee against the trust assets is judicial sale or appointment of a receiver”. Ie it is necessary for the insolvency practitioner to go to court.

Insolvency Practioners Remuneration and Disbursements

An issue close to most insolvency practioners hearts is the indemnity from trust assets for fees and how far that indemnity extends. Without going into too much detail, it appears to me that the court is generally favourable to the right of indemnity extending to the protection and realisation of trust assets (“protection umbrella”). See the case Re Suco gold.

The obvious question is then how many, if not all of the statutory tasks required by a liquidator would be accepted to fall under the protection umbrella. My thoughts are probably all, should any of the Liquidator’s statutory requirements not be completed (“from appropriately report to creditors to having the property valued”) it could put in jeapordy the liquidator’s position and ability to protect and realise the trust assets.

I am sure everyone has a different view on what is involved under the protection umbrella and would enjoy any thoughts from readers on the above.

I have to thank John Tanna and the team at Jones Partners as their thoughts are have provided significant input in the above. I would also like to apologize for my first blog being on quite a heavy reading topic, I will try to mix it up with a range of different matters in the future.

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Personalised advice and solutions to put your mind at easeduring times of personal or business financial turmoil

Strengthening Our Presence in Greater Western Sydney – Narellan Office

We are excited and pleased to announce the opening of our new South West Sydney Office at Narellan. Daniel Soire, a Principal of Jones Partners and a Registered Liquidator, is a local Macarthur resident and will be supervising the Narellan office.
For many years now, Jones Partners has truly valued the importance of being accessible to professional advisors and business owners and individuals throughout Greater Western Sydney (“GWS”). The GWS region is a very significant contributor to the States GDP and has a huge diversity in the range of businesses that operate within it. Our continued presence (via our Norwest Business Park Office) has enabled us to develop strong relationships with other professionals such as accountants, lawyers and financiers, as well as and importantly assist business owners and individuals in this region who may get into financial difficulty. Having a very strong and keen interest in what happens in the region also helps us to understand the factors that can affect SME businesses as well as individuals.

The new Narellan office puts us closer to fellow professionals and SME businesses and individuals when they need expert insolvency, restructuring or bankruptcy advice in South West Sydney. We believe this proximity and not “the ivory tower” approach is what such stakeholders are seeking when looking for specialist advice in corporate and personal insolvency and restructuring.

Our continued and sincere focus throughout the GWS region reflects the importance we place on ensuring that SME businesses and individuals in this region get the “right advice” when they may be in financial difficulty. Jones Partners are a Chartered Accounting Firm that specialises in the provision of corporate and personal insolvency and restructuring services. For more information go to jonespartners.net.au