Revesting of Property

What is revesting?

Revesting is the transfer of property that had vested in a bankruptcy trustee back to the bankrupt after they have been discharged from bankruptcy. These provisions are meant to encourage trustees to realize assets as expediently as possible.

Provisions dealing with the revesting of property were added to the Bankruptcy Act in 2003. Until then all property of a bankrupt vested in the trustee, and there was no mechanism for that property to revest. Trustees could hold property for 20 years and no one could deal with that property unless the trustee disclaimed their interest in it. The revesting provisions changed that position.

What estates do the provisions affect?

There are transitional provisions, but all bankruptcy estates will be subject to the new provisions, even if the bankrupt was discharged occurred before the introduction of the provisions.

What type of property is affected?

Subject to the exemptions below, all non-cash property is able to be revested. Cash held at the time of bankruptcy or cash acquired during the bankruptcy is excluded from the revesting provisions as it does not need to be realized.

What are the exemptions?

Two major classes of property will not revest under any circumstances. They are:

1. property that was not disclosed in the bankrupt's Statement of Affairs; and
2. after-acquired property where the acquisition of that property was not notified to the trustee within 14 days of the bankrupt's knowledge of its acquisition.

These exemptions are designed to stop bankrupts from not disclosing property to their trustees and having the property revest. The bankrupt must ensure that the trustee is aware of the property for it to be eligible for revesting. Section 127, giving the trustee 20 years to realize the property, will still apply to property that is not disclosed .

When does an asset revest?

There is a 6 year time period. When that six year period commences is dependent upon when the estate commences. There are three possibilities for property disclosed in the Statement of Affairs:

1. For estates that commenced after 5 May 2003, the revesting date is 6 years after the date of discharge;
2. For estates that commenced before 5 May 2003 - but where the date of discharge is after 5 May 2003 - the revesting date is 6 years after the date of discharge;

3. For estates where the date of discharge was before 5 May 2003, the revesting date is 6 years after 5 May 2003. That is, the revesting date will be 5 May 2009.

The earliest date that any property can revest to any bankrupt is 5 May 2009 - for estates when the date of discharge was prior to 5 May 2003. This gives trustees at least six years after the introduction to the provision to sell any property in older estates and to avoid revesting.

When does "after-acquired property" revest?

The acquisition of after-acquired property must be notified to the Trustee within 14 days of the bankrupt's knowledge of the acquisition. If notification is not given, the property will not revest at all. Where notification is given, the revesting date will be 6 years after either the date of discharge, or the date of notification, which ever is later.

There are two possibilities:

1. Where the acquisition and notification occurs before the discharge of the bankrupt, the revesting date is 6 years after the date of discharge, or if discharge occurred before 5 May 2003, the revesting date of 5 May 2009 applies;
2. Where the acquisition occurs before the discharge of the bankrupt, but notification is given after discharge, the revesting date is 6 years after the date of the notification, or if notification occurred before 5 May 2003, the revesting date of 5 May 2009 applies. These cases will be fairly limited as the discharge date must fall within 14 day after the acquisition.

Again, the earliest that any property can revest to any bankrupt is 5 May 2009.

What happens when an objection to discharge is lodged?

The 6 year period for revesting will not start until the discharge of the bankrupt, which may be as much as 5 years after the normal date for discharge. If an objection is removed and the bankrupt is immediately discharged due to statutory discharge provisions, the six year period commences on the date that the objection is removed, not the date that would have been the date of discharge if there had been no objection. Revesting cannot occur while the person is still a bankrupt.

Can the trustee delay the revesting of property?

Yes. The trustee may issue an extension notice to the bankrupt during the unexpired 6 year period and extend the period for a further 3 years after the "current" revesting period or 3 years after some specified event.

The Act does not have any limit to the number of extension that the trustee can make. Therefore, in theory, the trustee can keep extending the period indefinitely.

(4) If the trustee, before the current revesting time, gives the bankrupt a written notice (an extension notice ) stating that a later revesting time applies to particular property, then that later time becomes the revesting time for that property.
(5) There is no limit on the number of extension notices that the trustee may give (either generally or in relation to particular property.

Disclaimer
The enclosed information is of necessity a brief overview and it is not intended that readers should rely wholly on the information contained herein. No warranty express or implied is given in respect of the information provided and accordingly no responsibility is taken by Worrells or any member of the firm for any loss resulting from any error or omission contained within this fact sheet.

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Last Updated: 3.3.2008