If you become bankrupt, your bankruptcy trustee can sell or realise any assets which you own which are divisible property. This includes things like your interest in your house, shares in public companies, your car (if valued over a certain amount) or any significant cash at bank.
But often people don’t know that a bankruptcy trustee can also collect and sell assets which are acquired during the period of bankruptcy. These types of assets are referred to as after acquired property.
What types of assets are commonly after acquired property?
The most common after acquired property we see bankrupts obtaining are inheritances. If a bankrupt becomes entitled to an inheritance whilst bankrupt, the inheritance must be paid to their bankruptcy trustee. Becoming entitled to an inheritance does not mean receiving it and often a bankrupt will become entitled to an inheritance on the date someone passes away.
We also very occasionally come across bankrupts who have large gambling winnings, which can also be after acquired property. Any significant lottery or gambling winnings must also be paid to a bankruptcy trustee.
Occasionally, assets purchased with a bankrupt’s income can be after acquired property. Even if the bankrupt has declared their income to their trustee and paid all required income contributions. An example of this may be if a bankrupt earning a good income buys an expensive car during their bankruptcy, then the car may be after acquired property.
So, what can you do?
For potential inheritances, anyone leaving money to a bankrupt should change their will before bankruptcy or as soon as possible thereafter. If you are bankrupt, money can be left to your spouse or to an appropriate trust arrangement. This is something that you don’t want to leave until it is too late.
In respect of other potential issues, you may wish to consider:
- Changing any lotteries or syndicates out of your name or reconsidering participating in any type of gambling activities; and
- Considering whether to purchase any assets with income acquired after bankruptcy and obtaining professional advice where necessary regarding this.
How we can help
When we meet with people considering bankruptcy, we discuss the above provisions and risks with them. This can assist in identifying any situations which may give rise to you becoming entitled to after acquired property so you can take action to minimize these risks before you go bankrupt.
So, if you are considering bankruptcy and want to find out about all the risks which may be involved, including about after acquired property, please get in touch with us on 1300 906 966 or send us an email email@example.com to arrange a free confidential initial discussion.