This article will discuss the notification of bankruptcy under the Family Law Act 1975. Bankruptcy is a legal status that declares that an individual or business is unable to pay their debts. It is initiated when a person, known as a debtor, voluntarily files for bankruptcy. Bankruptcy also occurs when a debtor’s creditors force them into bankruptcy through a court order.
Once declared bankrupt, an individual’s non-exempt assets are transferred to a trustee who manages the process. Bankruptcy is a legal process that offers a lifeline to those who find themselves drowning in debt, providing a fresh start and a chance to rebuild their financial lives. In this article, we’ll explore the notification of bankruptcy in Australia, its implications, and its role in family law matters.
Bankruptcy vs Insolvency
Bankruptcy | Insolvency |
Bankruptcy is a legal process that deals specifically with the insolvency of individuals and businesses. It is a formal declaration of insolvency and involves a court proceeding. Bankruptcy provides a structured framework for managing and resolving the debts of the insolvent party. It involves the appointment of a trustee who oversees the administration of the bankruptcy. This includes the sale of non-exempt assets to repay creditors. | Insolvency refers to a financial state where an individual or entity is unable to pay their debts as they become due. It is a broader term that encompasses both individuals and businesses facing financial difficulties. Insolvency can arise from various factors, such as: – Cash flow problems – Excessive debt; or – A decline in business operations. When someone is insolvent, it means their liabilities exceed their assets, resulting in an inability to meet financial obligations. |
Bankruptcy and Family Law Matters
In the context of family law, bankruptcy can significantly impact various aspects of the proceedings. It can affect property division, support payments, and financial obligations between the parties involved. When one party to a family law matter becomes bankrupt, it may complicate the resolution of financial matters. It may also require additional legal considerations.
In terms of property division, bankruptcy can affect the distribution of assets between spouses or de facto partners. The bankrupt party’s assets may become part of the bankruptcy estate, which is managed by a trustee. This can influence the division of property and may limit the non-bankrupt party’s ability to access certain assets.
Additionally, bankruptcy can impact spousal maintenance and child support obligations. The bankrupt party’s financial situation may affect their ability to make payments, resulting in potential modifications to support arrangements. Hence, the court takes into account the bankrupt party’s income, assets, and liabilities when determining support obligations.
Section 79G: Notifying Bankruptcy Trustee Etc. About Application Under Section 74, 78, 79 or 79A
Section 79G of notification of bankruptcy refers to the notification requirements for bankrupt individuals or debtors subject to a personal insolvency agreement. These individuals are usually parties to legal proceedings under specific sections of the law. Let’s break it down.
Bankrupt Individuals
Bankrupt individuals involved in legal proceedings under sections 74, 78, 79, or 79A must notify their bankruptcy trustee. This notification ensures that the bankruptcy trustee is aware of the proceedings that may impact the bankrupt individual’s financial situation.
Notification of Bankruptcy for Debtors with Personal Insolvency Agreements
Debtors with personal insolvency agreements must inform the agreement’s trustee when involved in legal proceedings under sections 74, 78, 79, or 79A. This notification ensures that the trustee:
- Is also informed of the proceedings; and
- Can take appropriate actions in light of the debtor’s financial circumstances.
The specific details and procedures for giving notice may be outlined in the applicable Rules of Court. These are rules and regulations that govern court proceedings and provide guidelines for various legal processes. These rules may specify the manner, timeframe, and other requirements for providing the necessary notification to the:
- Bankruptcy trustee; or
- The trustee of the personal insolvency agreement.
Section 79H: Notifying Court About Bankruptcy Etc.
Section 79H pertains to the requirement of notifying the court related to bankruptcy, personal insolvency agreements, and related proceedings. Let’s break it down:
1. Notification of Bankruptcy
Individuals who meet the following criteria must notify the relevant court when they become bankrupt before the final determination of their application:
- They are a party to a marriage.
- They are a party to a proceeding for an application under sections 74, 78, 79, or 79A.
- They become bankrupt before the application is finally determined.
The purpose of this notification is to inform the court exercising jurisdiction that the individual has become bankrupt.
2. Notification of Personal Insolvency Agreement
Section 79H outlines individuals who should notify the court when they become a debtor subject to a personal insolvency agreement. They must provide the notification before the final determination of their application and meet the following criteria:
- They are a party to a marriage.
- They are a party to a proceeding for an application under sections 74, 78, 79, or 79A.
- They become a debtor subject to a personal insolvency agreement before the application is finally determined.
The purpose of this notification is to inform the court exercising jurisdiction that the person has become a debtor subject to a personal insolvency agreement.
3. Institution of Proceeding Under the Bankruptcy Act 1966:
Regarding the Bankruptcy Act 1966, the applicable Rules of Court may establish provisions for individuals who meet the following criteria:
- They are a party to a marriage.
- They are a party to a proceeding for an application under sections 74, 78, 79, or 79A.
- Before the final determination of that application, they become:
- A party to a proceeding before the Federal Court; or
- The Federal Circuit and Family Court of Australia (Division 2) under the Bankruptcy Act 1966
This proceeding may be related to either the person’s bankruptcy or their status as a debtor subject to a personal insolvency agreement. In such cases, the individual is to notify a court exercising jurisdiction under this Act about the institution of the proceeding under the Bankruptcy Act 1966.
4. Notification of Application by Bankruptcy Trustee
Section 79H of notification of bankruptcy outlines a bankruptcy trustee’s notification of an application. What if a person is the bankruptcy trustee of a bankrupt party to a marriage and applies for an order under Division 4A of Part VI of the Bankruptcy Act 1966 by making an application under section 139A? If this is the case, they may be required to notify the court about the making of the application.
In accordance with the relevant Rules of Court, there may be provisions that require a person to notify a court exercising jurisdiction under this Act when they meet the following criteria:
- They are the bankruptcy trustee of a bankrupt party involved in a marriage.
- They submit an application under section 139A of the Bankruptcy Act 1966, seeking an order under Division 4A of Part VI of the Act.
The purpose of this notification is to inform the court about the submission of the application by the bankruptcy trustee. It ensures that the court is aware of the application made under these circumstances.
5. Applications Determination
In the context of this section, the final determination of an application for an order under sections 74, 79, or 79A occurs under the following circumstances:
- The application is withdrawn or dismissed.
- An order, excluding an interim order, is made as a result of the application.
Similarly, for the purposes of this section, the final determination of an application for a declaration under section 78 occurs when:
- The application is withdrawn or dismissed.
- A declaration is made as a result of the application.
Section 79J: Notifying Non-Bankrupt Spouse About Application Under Section 139A of the Bankruptcy Act 1966
- Section 79J of notification of bankruptcy refers to the authority of the Rules of Court. These rules establish guidelines or provisions regarding a specific scenario. These provisions apply to a person who meets two criteria:
- (a) The person is appointed as the bankruptcy trustee of an individual who is bankrupt and is a party to a marriage.
- (b) The person, in their capacity as the bankruptcy trustee, submits an application under section 139A of the Bankruptcy Act 1966. This application seeks an order under Division 4A of Part VI of the same Act. However, it pertains to an entity other than the party involved in the marriage.
In such cases, the Rules of Court allow or require the person to notify the other party in the marriage about the submission of the application.
Importance of Seeking Legal Advice
It’s difficult to navigate bankruptcy matters alone without proper legal guidance. JB Solicitors specialises in bankruptcy and family law matters. Our family lawyers can provide the expert guidance you need during this challenging family law matters. We can also provide methods that can help reach amicable resolutions with our mediation and arbitration services.
Contact us today if you need more clarifications about the notification of bankruptcy in family law matters.