Bankruptcy is a tough problem to deal with. Apart from the stress, there is also the uncertainty on what will become to their assets and belongings. When someone goes bankrupt, the individual’s assets would be granted to a Trustee. Nevertheless, the Trustee does not keep everything.
We need to understand that there are limitations to what can and can’t be vested in a Trustee upon bankruptcy. Normally, all property owned by a person, or acquired when he/she hits bankruptcy, are vested in the Trustee. These are termed “divisible property”, and is sold by the Trustee to compensate the creditors of the bankrupt estate.
There are some assets which are fully protected or guaranteed to a particular value, which means that these assets may be retained by the insolvent up to a specified value. “Non-divisible property” is what they are called, which may include household essentials like beds, fridges and other household items, tools of trade, vehicles and also earnings of certain compensation claims.
The maximum amount of the retainable value of each asset, are indexed and updated twice per annum. At the moment, tools of trade are allowed to be retained, which can consist of reference books, equipments, machineries and professional instruments, to the amount of $3,550. Likewise, the bankrupt is also permitted to maintain a vehicle costing up to $7,200 (in value or equity), provided it is used mainly for transport.
Property that can be considered divisible is also limited. The Bankruptcy Act states that any personal asset owned by the individual which possess a sentimental value and is identified by a resolution made by creditors prior to being realised by the Trustee, is also retainable. Furthermore, personal property as detailed in the Bankruptcy Regulations, may also be retained. The Regulations recognises awards made to the bankrupt for his/her achievements in the academic, cultural, military or sporting arena. However, monetary awards are not included.
Money, which also comprises of cash in all bank accounts, owned by a bankrupt is also vested in the Trustee. However, a bankrupt may be allowed by the Trustee to keep some money to cover ordinary living expenses in the short term.
When an individual is discharged from bankruptcy, his property is not automatically returned. When he is discharged, normally three years after the initial bankruptcy, whatever property that he had disclosed in their Statement of Affairs, or which was purchased after the date of bankruptcy and was disclosed to the Trustee, will continue to be vested in the Trustee for another six years. With that, if the property is yet to be sold, it may be returned to the former bankrupt.