Category Archives:Bankruptcy and debt law

Is your Personal Property Safe?

A recent court decision has provided direction to legal practitioners on the necessity of registering all personal property which is subject to a lease/ hire agreement on the Personal Property Securities Register (the PPSR).

Since the introduction of the Personal Property Securities Act 2009 (Qld) (the PPSA), it has been emphasised that persons with an interest in personal property must secure these interests. Simply put, all personal property (e.g. equipment) the subject of an agreement whereby you enable another person or company to have possession or use of your personal property before the obligations (i.e. full payment) of the agreement that is the basis of this arrangement are performed, must be registered on the PPSR to ensure your rights to that personal property are not outranked by entities with competing rights. The PPSA highlights that personal property is nearly all types of property other than real estate.

In the Australian case of White v Spiers Earthworks Pty Ltd [2014] WASC 139, Spiers Earthworks Pty Ltd (Spiers) entered into a hire agreement (the Agreement) to sell its business to BEM Equipment Pty Ltd (BEM). Pursuant to the Agreement, BEM took possession of personal property with a market value of greater than $1 million from Spiers.

Unbeknown to Spiers at the time, Spiers had not registered its interest in the personal property on the PPSR. As a result, Spiers lost the majority of its assets when BEM became insolvent. The appointed receiver that was to distribute the assets to BEM’s creditors denied Spiers had a legal right to the personal property subject to the Agreement as it did not have a secured interest, that is to say, Spiers had not registered the equipment in question on the PPSR.

Thus, title to the personal property was considered to have passed to BEM upon possession and accordingly became part of the asset pool which was distributed to creditors who had registered their interests and as a result took priority over Spiers. Spiers lost all rights to its personal property and sustained a loss of more than $1 million.

Sadly for Spiers, this loss could easily have been prevented. Spiers could have registered its interest in the personal property on the PPSR and the receiver of BEM’s assets would have had to release the personal property back to Spiers. This case emphasises that the courts are now enforcing the provisions of the PPSA.

If you have personal property that is not in your possession, it is vital that you protect your interests in this personal property by seeking urgent legal advice on the way the PPSA affects you., Hall & Co Solicitors will be happy to assist you with any enquires you have relating to the PPSA and the PPSR.

Bankruptcy law

Bankruptcy is a voluntary means of quickly dealing with creditors if the debts you owe are $5,000 or more and will be in place for 3 years with the exception of circumstances where your trustee lodges an objection to the discharge of your bankruptcy and therefore the bankruptcy period may be extended for an additional 5 years.

The process is commenced by the lodgement of a Debtor’s Petition but you may be eligible to apply for alternative legislative agreements to control the situation without the serious implications that come with bankruptcy.

Frequently Asked Questions

Bankruptcy – are you going to take my house?

Your trustee in bankruptcy (the person who is responsible for your financial situation when you are bankrupt) will ascertain what property is to be divided amongst your creditors (the people to whom you owe money) at the date of bankruptcy. This will not include an interest held by another party and is determined on a case by case basis whether your trustee will seek to recover the value of your interest in the house.

Is somebody going to take my belongings?

As at the date of bankruptcy, your trustee will determine what assets (anything of value owned by you) and anything you own during the term of the bankruptcy may be recovered and sold by your trustee. Items which may be retained by you may include the following:

  • Funds from superannuation policies;
  • Life insurance policies;
  • Household and personal effects;
  • Motor vehicles (depending upon the amount of equity in the vehicle);
  • Tools of trade used to derive an income

What happens to debts I incur after bankruptcy?

You will be responsible for any debts incurred after the date of bankruptcy.

Creditors are continuing to hassle me, what do I do?

The legislation prevents creditors from recovering their debts from you after bankruptcy though it is not uncommon that often creditors will not document that you have been made bankrupt and you may have to advise them of what has occurred and provide them with your trustee’s details so that they are able to confirm your bankruptcy.

Please contact Hall & Co Solicitors to arrange an appointment to determine what assets are likely to be effected if you decide to apply for bankruptcy or explore the alternatives which may be available to you.

Part IX Debt Agreements

A Part IX (Part 9) debt agreement provides a relatively informal, low-cost alternative to bankruptcy for low income debtors (people who owe money to others).

To be eligible to propose that a Part IX debt agreement be formed, the debtor must:

1. Be insolvent as defined by the relevant legislation;
2. Meet the relevant income, debt and asset restrictions as provided by the legislation;
3. Not have been bankrupt, party to a debt agreement or given an authority under Part X of the Bankruptcy Act in the 10 years before the proposal time.

The benefits of forming a Part IX debt agreement is that upon acceptance of the agreement by creditors (the people to whom money is owed), the debt can be repaid over an extended period of time, during which time those debts are frozen.

If you wish to make a Part IX debt agreement proposal and you meet the eligibility criteria, we will prepare the relevant information and obtain from you the necessary supporting documents such as account statements etc and provide that to the official administrator who will then determine whether or not you have met the eligibility criteria which will then be distributed to your creditors for their acceptance or rejection.

If the majority of the creditors (in value) who reply accept the proposal within the relevant time frames, you will be required to meet the payments as set out in the debt agreement and the unsecured creditors will not be able to take any action against you or your property. There are time limits and criteria required to be met and if you require assistance please contact Hall & Co Solicitors to discuss the matter further.

Part X – Personal Insolvency Agreements

A Personal Insolvency Agreement is a formal agreement between a debtor (someone who owes money) and their creditors (someone who is owed money) that sets out how the debtor will satisfy the debts.

This document is executed by the debtor and his or her trustee (someone who has taken control of the debtor’s affairs) and will usually spell out exactly how money owed to creditors will be repaid over time and/or the sale of assets.

The agreement is a legally binding document which must be accepted by the majority of creditors. To determine whether you are eligible for a Part X (Part 10) agreement please contact our office for further information.

When we have explained in an easy to understand manner what your options are, if you wish to proceed with forming such an agreement we will attend to the preparation of a report which summarises your financial position to your creditors and the proposal you wish to make to them.

Whilst all creditors are not required to agree, creditors amounting to at least 75% of the dollar value of total debts must agree to your proposal.

If you decide that this is the course of action you wish to take, we will attend to the preparation of the statement of affairs and the completion of the relevant forms for the appointment of a trustee.

A meeting of creditors will then be conducted within 25 days where the creditors will vote as to the acceptance or rejection of your proposal.

If your proposal is accepted, those debtors which have proved their debt cannot take further legal action against you and the agreement shall remain in place until you have fulfilled your obligations as set out in the agreement.

Many legislative requirements must be complied with in order for a Part X agreement to be formed and we therefore recommend you call one of our experienced team members to assist you to determine whether or not you are eligible to propose that a Part X personal insolvency agreement, which can often be significantly shorter in duration than bankruptcy itself and also enables you to find relief from debt in a controlled manner.