Part XI Administrations of Bankrupt Estates of Deceased Persons
Part XI of the Bankruptcy Act 1966 (“the Act”) provides for the appointment of a trustee to a deceased estate, where the estate is or may be insolvent. It is important to note that the estate of a deceased insolvent debtor may be administered under appropriate state based probate legislation. The alternative of seeking the appointment of a trustee under Part XI is preferred where there are or may be voidable transactions, where the affairs of the estate are complex, and/or where the appointment of such a trustee may be necessary to protect creditors’ interests.
In order for an appointment of a trustee pursuant to Part XI, the debtor must have satisfied one of the residency requirements at their date of death:
- the debtor was personally present or ordinarily resident in Australia
- the debtor had a dwelling-house or place of business in Australia
- the debtor was carrying on business in Australia, either personally or by means of an agent or manager, or
- the debtor was a member of a firm or partnership carrying on business in Australia by means of a partner or partners, or of an agent or manager.
Process of Appointment
The administrator of a deceased person’s estate, or a creditor that is owed at least $5,000 (after deducting the value of any security), may present a petition to the Court under Part XI of the Act in order that a trustee be appointed to manage the estate’s affairs. An order for the administration of a deceased insolvent estate can only be made by the Federal Circuit Court or the Federal Court of Australia. The application to the Court must include:
- Form 4 – Statement of Affairs under Part XI ; and
- Form 12 – Trustee Consent to Act Declaration); and either
- Form 14 – Creditor’s petition under s 244 of the Act; or
- Form 15 – Petition under s 247 of the Act by persons administering the estate of a deceased person; or
Copies of these forms are available from the Federal Court of Australia website, or can be obtained by request from O’Brien Palmer.
Role of the Trustee
On appointment of a trustee, all former administrators are divested of their powers and responsibilities to the estate. All divisible property and any after acquired property of the estate will thereafter vest in the trustee. The trustee will administer the estate subject to the provisions of the Act. The process of such an administration closely resembles the bankruptcy process. The trustee may be required to realise certain assets of the estate, to recover any of voidable dispositions identified, pay dividends if sufficient funds are realised, report to creditors and draw/pay fees associated with the administration.
The above information is by necessity, general in nature and its brevity could lead to misunderstanding. For further information, you are invited to contact O’Brien Palmer.