Who administers the bankruptcy law?

The Bankruptcy Act is a Commonwealth Act; therefore it applies in all states and territories. The relevant courts are the Federal Court (General Division) and the Federal Circuit Court. The Family Court also has jurisdiction under the Bankruptcy Act where the trustee is a party to family law property or spousal maintenance proceedings. Both the Federal Court and the Federal Circuit Court can transfer proceedings to the Family Court (ss 35, 35A Bankruptcy Act). (For the contact details of these courts, seeContacts”.)

The Bankruptcy Act creates the roles of Inspector-General in Bankruptcy, Official Receiver and Official Trustee in Bankruptcy. The Australian Financial Security Authority (AFSA) (see “Contacts”) undertakes each of these roles. When a person becomes bankrupt all their divisible property (seeDivisible property”) vests in (i.e. ownership rights are moved to) the Official Trustee in Bankruptcy (or in the registered trustee if there is a private trustee). The trustee can require a bankrupt to provide all financial documents and any other information relevant to the bankruptcy. The trustee can ask the bankrupt to hand over their passport.

A trustee in bankruptcy also has the power to:

investigate the conduct and dealings of the bankrupt and the reason for bankruptcy; and

seize and sell certain assets and distribute the proceeds.

AFSA, as the Official Trustee in Bankruptcy, is the trustee for the majority of bankruptcies; the remainder are managed by private registered trustees.

AFSA’s website (www.afsa.gov.au) is very useful; it includes legislation, statutory forms, indexable amounts, statistics and comment on recent events.

AFSA as trustee vs a private trustee

A non-business bankrupt with no assets who has bankrupted via a debtor’s petition usually has AFSA as their trustee (rather than a private trustee).

A private registered trustee usually becomes trustee at the request of a petitioning creditor or debtor before the debtor becomes bankrupt. In some cases the creditor can ask for a private registered trustee to replace AFSA as the trustee after the debtor becomes bankrupt (ss 156A, 157). It can be an advantage for a debtor to not have a private trustee, as the trustee’s fees can be significant.

Complaints about independent trustees

Anybody who is concerned about a trustee or any other aspect of their bankruptcy administration can complain to AFSA, which reports directly to the Inspector-General. The Regulation and Enforcement department of AFSA will investigate complaints against private trustees and against AFSA itself.

To lodge a complaint, visit the AFSA website and use the online enquiry/feedback/complaint form, write a letter, or telephone AFSA and ask to speak to someone in AFSA Regulation and Enforcement. (For more information on the Bankruptcy Regulation and Enforcement area and its complaints procedures, visit AFSA’s website at www.afsa.gov.au).