Recently I received an email from a former Bankrupt whose bankruptcy I had been administering. The email said “thank you both for your handling of this matter. Whilst a stressful time, your communication and consideration was very much appreciated”.
This individual had accumulated a range of credit card debts of just over $350,000. The incurrence of such debts was largely due to some significant health and family issues that he had been trying to deal with over many years. However, it got to the point where he could no longer make any headway on the level of credit card debt, despite earning a six figure salary. The inability to reduce the debt was taking a toll on his health and overall future perspective.
Consequently after considering the various options, he declared voluntary bankruptcy. In years 1 and 2 of the Bankruptcy, certain realisations were made such as equity in real estate and receipt of compulsory income contributions. These realisations enabled a first interim dividend to be paid to unsecured creditors. All was going to plan.
Importantly, I recall prior to the voluntary bankruptcy commencing that I discussed the topic of “after acquired assets” with him. In particular, my example was that of an interest in a deceased estate that may arise during the 3 year period of a bankruptcy. Certainly, this was not anticipated as the relationship with his family members had become fractured and quite strained. In short, the interest acquired or that devolves upon a bankrupt at the commencement of or during their bankruptcy from a deceased estate is an asset of the bankruptcy and therefore available for the benefit of unsecured creditors.
During the latter part of the 2nd year of the bankruptcy, he received notification from the Executor of his Late Father’s Estate that he had been listed as a beneficiary to approximately ¼ of the Deceased Estate (this such share was worth approximately $400,000). This was quite a surprise given the relationship with his family. When I received such notification from the former Bankrupt and confirmed same with the Executor, I discussed a solution with the Bankrupt which saw me suspend for a period of time of the compulsory income contributions he was making. This afforded him some breathing space, whilst not jeopardising the position of unsecured creditors given the share (or distribution) expected from the Deceased Estate, ie it was going to be sufficient to pay out all unsecured creditors in full, including interest claims.
Subsequent to be notified of the interest, there was a regular exchange of information regarding the timing of the receipt of the Deceased Estate Funds, as well as timely distributions being made to unsecured creditors of the Bankruptcy. Very recently sufficient monies were received from the Deceased Estate whereby a final dividend distribution was made to unsecured creditors and the bankruptcy annulled by force of Section 153A of the Bankruptcy Act.
Whilst from my perspective as a Bankruptcy Trustee, I approached with this Bankruptcy with the same degree of care and skill as any other bankruptcy administration, it is clear that the individual was appreciative of the support, explanations and communications that he received from me and my staff which assisted in him being able to close at this chapter and commence a new one. After all, there is light at the end of the tunnel for those in financial difficulty.
This bankruptcy administration was also a fantastic outcome for unsecured creditors who saw all monies owed to them repaid!!
Bankruptcy is often demonised by people that know little about it factually (the Jack of All Trades & Master of None!) or alternatively those that have been a recalcitrant bankrupt and did not get away with what they thought they could! Getting the right information about personal insolvency options and the outcomes can very often help alleviate (not eliminate) some of the stress that is part of making this important choice.
If you would like to know more about personal insolvency options or have a client in financial difficulty please do not hesitate to contact me.