Transactions to defeat creditors
By Administrator 24 February, 2014
A transaction to defeat creditors is exactly as it sounds; it is a transaction that a person enters into in order to defeat their creditors. But how can you “defeat” your creditors?
If you were to suddenly find yourself unable to pay your debts (i.e. you were insolvent) and you declared yourself Bankrupt, your creditors would receive a proportionate and fair share of the sale proceeds of any assets you own that have a reasonable amount of equity in them. If you know that you are unable to pay your debts, though, and you decide to sell or transfer any of your assets so that they will not be sold when you declare Bankruptcy, you are trying to defeat your creditors.
A transaction to defeat creditors is such because of the intention behind it. When you declare yourself Bankrupt, your Bankruptcy Trustee must perform investigations into your financial affairs. They will check to see if you have transferred any assets into anyone elses name in the past, perhaps that of a family member or spouse, or sold anything for a lot less than what it was worth. If you have done so, they must then determine if you were insolvent at the time, that is, that you were unable to pay your debts as and when they fell due. If you were, it could be determined that you transferred or sold those assets with the intention of keeping them from your creditors in the future. It is possible that the transaction could be reversed, and the asset sold at its proper value so that the sale funds can be evenly distributed to your creditors.
If you are considering the effects and rules of Bankruptcy, you should consult the advice of a professional before taking action. Your past actions can have an effect on the way that your Bankruptcy is administered, and in addition, there may be other options available to you so that you can avoid Bankruptcy and the possibility of any such transactions being reversed. To avoid bankruptcy you may wish to consider a Debt Agreement or a Personal Insolvency Agreement (depending on criteria).
Our highly experienced advisors have a background in all aspects of personal insolvency, and will be able to give you advice that is tailored to your unique financial situation. Call us today on 1800 676 598.