Bankruptcy is a legal process that allows individuals to deal with their debts when they are unable to pay them. During the period of bankruptcy, the debtor’s assets are realised by the Trustee to repay creditors. However, what happens if the debtor acquires or becomes entitled to property during the bankruptcy?

The answer to this question depends on various factors, including the nature of the property and the timing of the acquisition. In this article, I will explore what happens when a bankrupt acquires or becomes entitled to property during bankruptcy.

If a bankrupt acquires or becomes entitled to receive property during the bankruptcy, the Trustee may seize and sell the property for the benefit of creditors. The property can include any asset that the bankrupt receives, such as an inheritance or lottery winnings.

There are exceptions to the seizure of property by the trustee during bankruptcy. The Bankruptcy Act 1966 allows the bankrupt to retain certain property that is considered necessary for their basic needs. This property is called exempt property and includes:

  • Personal clothing and effects
  • Household furniture and appliances
  • Tools of trade valued at up to a certain amount – $3,950 as at the date of publication
  • A motor vehicle valued at up to a certain amount – $8,550 as at the date of publication
  • Superannuation funds (in most cases)

If the bankrupt acquires property that falls under exempt property, they may be able to keep it, even if it is acquired during bankruptcy.

Furthermore, the bankrupt can also apply for creditors to pass a resolution or for an order from the court to retain property that would otherwise be seized by the Trustee.

A bankrupt is entitled to keep savings that arise from money they earn as income; however, if the savings are used to acquire an asset or even a term deposit account, these assets will be claimed by the Trustee.  

In summary, if a bankrupt acquires or becomes entitled to property during bankruptcy, the Trustee may take control of the property and use the sale proceeds to pay off the creditors. However, there are exceptions to the seizure, such as exempt property and property that is necessary for the bankrupt’s employment, education, or welfare. It is essential to understand the rules and exceptions surrounding the acquisition of property during bankruptcy to avoid any unexpected outcomes.

About the author

Greg Quin is a Partner at HLB Mann Judd Insolvency WA and has been with the team for 14 years. Greg oversees the daily operations of the many insolvency appointments managed by the HLB Insolvency team and looks after the operations of the practice.

If you have any queries about insolvency matters, please feel free to contact Greg on 08 9215 7900, 0402 943 091 or via email to

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