Realisation of property by Trustees in bankruptcy: the six year time limit is approaching

The introduction of a new six year time limit for realising property arose through the reforms which were proposed by the Bankruptcy Legislation Amendment Act 2002 ("the 2002 Act") and it is now prescribed by section 129AA of the Bankruptcy Act 1966 (Cth) ("the Act"). The 2002 Act received the Royal Assent on 18 December 2002 but the changes did not commence until 5 May 2003 (although some people may have been under the impression that the 6 year time limit would actually come into effect on 18 December 2008).

If property, which had vested in a Trustee pursuant to section 58 of the Act, is not realised within the six year time limit, the property will revest in the backrupt. Revesting means the transfer of property, back to the bankrupt after they have been discharged from bankruptcy. All bankrupt estates will be subject to these provisions even if the bankrupt was discharged prior to the introduction of the provision on 5 May 2003.

Section 129AA only applies to property which was disclosed in the bankrupt's Statement of Affairs or was after-acquired property (other than cash) which is notified to the trustee in writing within 14 days after the bankrupt acquired the property

The six year time limit does not alter the existing rule that trustees have up to 20 years to make claims on the bankrupt's property. Where the bankrupt does not disclose property and the Trustee finds out about it, the Trustee will still have 20 years to make a claim on that property pursuant to section 127.

Therefore, revesting of property back to a bankrupt could occur on certain dates which can be summarised as follows:

Where property is disclosed in the Statement of Affairs:

• Estates that commenced after 5 May 2003, the revesting date is 6 years after the date of discharge;
• Estates that commenced before 5 May 2003 but where the date of discharge is after 5 May 2003, the revesting date is 6 years after the date of discharge
• Estates that commenced before 5 May 2003 and the date of discharge was before 5 May 2003, the revesting date is 6 years after the introduction of the section, or 5 May 2009

Where a bankrupt has after-acquired property

• Notification is given before the discharge of the bankrupt, then the revesting date is 6 years after the date of discharge, or if discharge occurred before 5 May 2003, the revesting date is 5 May 2009;
• Notification is given after discharge, then the revesting date is 5 May 2009.