HISTORY OF BANKRUPTCY
EARLY COMMON LAW
· no imprisonment for debt.
· property of the debtor could be seized to satisfy debt.
· no provision for discharge of honest debtors from hopeless debt.
· no pro rata distribution of debtors assets amongst creditors.
IMPRISONMENT FOR DEBT
· by the thirteenth century debtors could be imprisoned and had to support themselves while in prison.
· in 1551 Montague CJ said:
"If the debtor has no goods, he shall live of the charity of others, and if others
will give him nothing, let him die in the name of God, and impute the cause of
it to his own fault, for his presumption and ill behaviour brought him to that
THE ACT OF 1542 (Henry VIII)
· first bankruptcy act passed.
· if a debtor fled from the country, kept house, neglected to pay his debts or delayed or defrauded creditors, he committed an "act of bankruptcy".
· assets could be sold.
· proceeds were distributed pro rata amongst creditors.
· debtor not released from unpaid debts.
· earliest version of current Section 37A of the Conveyancing Act 1919:
"Every alienation of property made with intent to defraud creditors is voidable on the application of a person thereby prejudiced. This section does not apply to a purchaser in good faith without notice of the intent to defraud creditors."
· transfers of property before bankruptcy, unless in consideration of marriage or for value, void
· a debtor guilty of improper conduct was to be stood in the pillory, one ear was to nailed to the pillory and then cut off when the debtor was released from the pillory.
· creditors could choose between making debtors bankrupt or imprisonment for debt.
· concealment of property was a felony (death penalty).
· debtors discharged from bankruptcy on payment of ten shillings in the pound.
· preferential payment to creditors were recoverable for the general body of creditors.
· debtors can present petitions.
· Deeds of Arrangement could be used for private bankruptcies.
CURRENT BANKRUPTCY LAW (as at September 2004)
BANKRUPTCY ACT 1966
· there is an Official Trustee for the Commonwealth.
· one Official Receiver for each bankruptcy district, has the powers of the Official Trustee.
ACTS OF BANKRUPTCY
If debtor commits an "act of bankruptcy" the law presumes him/her to be insolvent BUT committing an act of bankruptcy does not of itself make a debtor bankrupt. This only occurs after the hearing of a creditors petition or presentation of a debtor's petition (see below). Acts of Bankruptcy include:
· a conveyance or assignment of property for the benefit of creditors generally;
· if with intent to defeat creditors the debtor:
o departs or remains outside of Australia (e.g. Robert Trimboli);
o departs from his or her dwelling house or usual place of business;
o "otherwise absents himself or herself" or;
o begins to "keep house" (i.e. does not answer the door).
· a writ or garnishee issued to enforce a judgment fails to satisfy the judgment debt.
· a debtors petition is presented.
· at a meeting of creditors the debtor admits he/ she is insolvent.
· gives notice that payment of debts has been/ will be suspended.
· a debtor breaches a debt agreement (see below).
· debtor calls a meeting of creditors under Part X
· fails to comply with a Bankruptcy Notice.