THE EFFECTS ON PROPERTY A BANKRUPT CAN KEEP

The property that the trustee cannot take from a bankrupt is set out in the Act [Bankruptcy Act 1966 (Cth) s 116(2), Bankruptcy Regulations 2021 (Cth) regs 27-30]. This property includes:

  • ordinary clothing
  • necessary household goods (such as lounge suite, kitchen furniture, ordinary domestic refrigerator, washing machine, educational material, television set, stereo, video recorder, personal computer and phone)
  • tools of trade, plant and equipment that are used to earn income, and that are up to a certain value (indexed). For more information about the indexed value, see Australian Financial Security Authority (formerly ITSA)
  • certain policies of life assurance, endowment assurance, policies of insurance
  • the bankrupt’s interest in certain superannuation funds or approved
  • money received as damages or compensation for personal injury to the bankrupt, his or her spouse or family (including death). Also any property (such as a house or car) bought with, or mostly with, that money. Where those assets have been purchased partly but not substantially with compensation for injuries, for example 10%, on the sale of that asset the bankrupt is entitled to receive that same percentage from the proceeds of the sale
  • amounts paid by the State to the bankrupt under certain rural assistance agreements between the Commonwealth and the States
  • the separate property of a non-bankrupt spouse or held on trust for another person
  • motor vehicles with a net equity of less than $7 200 or $14 400 (indexed) for a jointly owned vehicle may not be taken by the trustee. Where a vehicle of higher value is sold the bankrupt will be given $7 200 (or $14 400) (indexed) in order to buy a cheaper vehicle which he or she can keep.

In determining what household goods can be retained, the trustee must regard:

  • the number and age of members of the bankrupt’s household
  • any special health or medical needs
  • any special climatic, geographical isolation factors
  • whether the assets are reasonably necessary for the household to run properly
  • whether the cost of storage and sale would exceed the sale price

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