As discussed in a previous newsletter, should a bankrupt’s income exceed the statutory threshold, they will be required to make income contributions toward their bankrupt estate.
However, should a bankrupt (who has been deemed liable for an income contribution) believe any such contribution will result in financial hardship, they may apply (in writing) to their bankruptcy trustee for relief under section 139T of the Bankruptcy Act 1966 (‘the Act’).
Section 139T(2) of the Act sets out the grounds in which a financial hardship application (‘the Application’) may be made. These include –
|(a)||The bankrupt or a dependant of the bankrupt suffering from an illness or disability that requires on-going medical attention and the supply of medicines, and the bankrupt is required to meet a substantial proportion of the costs of that medical attention or those medicines from his or her income.|
|(b)||The bankrupt is required to make payments from his or her income to meet the cost of child day-care to enable the bankrupt to continue in employment or other work.|
|(c)||The bankrupt is living in rented accommodation that is not provided by: the Commonwealth, a State or a Territory; or an authority of the Commonwealth, a State or a Territory; or a local government authority; and the bankrupt is required to pay the cost of that accommodation wholly or mainly from his or her income.|
|(d)||The bankrupt incurs substantial expense in travelling to and from the bankrupt’s place of employment or other work, whether by public transport or otherwise.|
|(e)||The spouse of the bankrupt, or another person residing with the bankrupt, who ordinarily contributes to the costs of maintaining the bankrupt’s household has become unable to contribute to those costs because of unemployment, illness or injury.|
|(f)||Any other reason prescribed by the regulations.|
A bankruptcy trustee will not make a determination as to the Application until such time as satisfactory evidence is provided by the bankrupt in support of the Application. This ‘satisfactory evidence’ is to include details of the bankrupt’s income, expenses and any other such matter on which the bankrupt relies in relation to the Application (section 139T(3)).
The Act sets out that a bankruptcy trustee must make a determination in regard to the Application as soon as practicable, and in any event, not later than 30 days after the day in which the Application is received (section 139T(4)).
Should the bankruptcy trustee fail to make a determination within 30 days of receipt of the Application, it is taken to have been refused (section 139T(5)).
In the event that the bankruptcy trustee is satisfied that financial hardship will be experienced as a result of the income contribution in question, relief will be granted.
Section 139T(6) of the Act sets out that such relief is to be granted by way of a higher income threshold amount (determined by the bankruptcy trustee) being applied against the bankrupt in question. This higher income threshold amount will result in either a partial or absolute reduction any income contribution due by the bankrupt for the relevant period.
Should a bankrupt be unhappy with the determination of the bankruptcy trustee in relation to the Application, they may apply to the Inspector-General to review the decision (section 139T(12)). Any such application for review by a bankrupt must be made, in writing, to the Inspector-General no later than 60 days after which the bankrupt is notified of the bankruptcy trustee’s decision (section 139ZG).
If you have any specific queries in relation to the financial hardship application process or bankruptcy in general, please feel free to contact our office for assistance.
About the author
Benjamin Mitchell is a Senior Insolvency Accountant at HLB Mann Judd Insolvency WA. Benjamin assists the Partners with the many Corporate and Personal insolvency appointments managed by the HLB Insolvency team.
If you have any queries about insolvency matters, please feel free to contact the team on 08 9215 7900.