破產與無力償債Understanding Bankruptcy and Its Impact on the Family Home

Bankruptcy can be a daunting prospect for individuals, especially when it comes to the fate of their family home. Many people wonder if their home is protected from being seized to pay off creditors. This article explains what usually occurs to family homes and what individuals, whether the bankrupt or the non-bankrupt spouse/partner, can expect in such situations.

From the outset, it should be noted a home is not a protected asset under the Bankruptcy Act 1966 (Cth). If there is equity in the property after paying out all mortgage and selling costs, the bankruptcy trustee is obligated to sell the property for the benefit the creditors of the bankrupt estate.

Ownership Dynamics: Joint Tenants vs. Tenants in Common. In cases where the bankrupt individual co-owns the property with a partner or spouse, the situation becomes more complex. If the property is owned as joint tenants, the bankruptcy automatically severs the joint tenancy, and the co-owners hold their interests as tenants in common. This typically means each party owns a 50% interest in the property.

Upon the issuance of a sequestration order, all divisible property of the bankrupt automatically vests with the trustee in bankruptcy.  This includes the bankrupt’s share in the property. The trustee then evaluates the property’s equity, usually through real estate appraisal. If deemed necessary, the trustee initiates transmission, which formally alters the title to the property to reflect the trustee as the registered owner.  This places the trustee in a stronger negotiating position as he or she can execute a contract of sale if required.

Once transmission has taken place (or alternatively a caveat has been placed over the property to prevent its sale without the trustee’s involvement) the trustee in bankruptcy usually follows the below structured approach:

1. Offering the co-owner the opportunity to buy the estate’s interest in the property; failing which
2. Inviting the co-owner to collaborate with the trustee on selling the property; failing which
3. Filing for court appointment of a statutory trustee for sale (and typically at the same time seeking vacant possession).  By obtaining vacant possession orders, a sheriff may later be involved in formal eviction proceedings if the court orders aren’t adhered.

Most homes are mortgaged, and mortgage enforcement can occur during bankruptcy, even if payments are up to date. However, mortgagees often defer to the bankruptcy trustee for property sale, as they will be paid out as a priority from any sale.  Mortgagees also avoid any negative press associated with forcibly selling a family home.

Understanding the implications of bankruptcy on the family home is crucial for individuals facing the same situation. While the home may not be protected, awareness of ownership dynamics, sale procedures, and potential eviction processes can help individuals navigate this challenging situation more effectively. Seeking legal advice early in the bankruptcy process is recommended to explore all available options and mitigate adverse consequences on the family’s housing situation.  At SLF Lawyers we are aware of various legal avenues (resulting or constructive trusts, doctrine of exoneration) which may alter the presumed 50% interest as set out above.  Obtaining this formal advice based on your personal situation may be the difference between keeping your family home or it being sold to pay down the creditors of your partner/spouse’s bankrupt estate.

文章作者 Anthony Cocolas of our Brisbane office.