Bankruptcy and family provision claims

In Bankrupt for Life, concerning the way a person can remain bankrupt for ever in Australia if they never file their statement of affairs (SOA), I referred to the case of a Mr Talent, who was made bankrupt in May 2000 but who had only filed his statement of affairs over 20 years later, in June 2020.

He took advantage of an ‘out’ in s 33A of the Bankruptcy Act that allows the court to treat the SOA as having been filed earlier, in this case, much earlier.  There were many factors for and against that Justice Flick weighed up – the length of time before Talent took any action, and that he must have realised he had not properly filed his SOA, but also the lack of opposition from the Official Trustee or any creditor and the pointlessness of his bankrupt status continuing.

In the end the Judge made an order in Mr Talent’s favour, “albeit with some misgivings”: Talent, in the matter of Talent v Official Receiver in Bankruptcy [2020] FCA 1294.

A family provision claim

Mr Talent was or is contesting his late mother’s will that excluded him from her estate, under the ACT Family Provision Act 1969.  Whether he needed to be out of bankruptcy to bring such a claim is another matter.

The rather odd legal outcome was recently summarised in Muir v Angeles [2020] NSWSC 1056:

“There is long-standing authority that holds that a bankrupt’s claim for family provision is not a chose in action that vests in a trustee in bankruptcy by the operation of s 58 of the bankruptcy Act. A family provision claim is a personal, or bare, right and, therefore, falls outside the ambit of s 58 … However if, whilst the applicant for a family provision order remains an undischarged bankrupt, he, or she, receives a lump sum, or other property through such proceedings, by way of a family provision order, such lump sum, or other property, will be available to the trustee for distribution to creditors …”.

See Keay’s Insolvency, 2022 11th ed, at page 180.  See also Maher v Burden [2022] VSC 617.