Revesting of Property

What is revesting of property?

Vesting of property to a bankruptcy trustee occurs at the commencement of a bankruptcy. Revesting is the transfer of any property that had prteviously vested in a bankruptcy trustee back to the bankrupt after they have been discharged from bankruptcy. These provisions (under section 129AA of the Bankruptcy Act) 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 else 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?

All bankruptcy estates are subject to the revesting provisions, even if the bankrupt was discharged before their introduction in 2003.

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 other exemptions?

Two major classes of property will never revest. They are:

1. property that was not disclosed in the bankrupt's Statement of Affairs; and
2. acquisitions of property after bankruptcy (after-acquired property) which were 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 that property revest to them. 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 property, will apply to property that was not disclosed to the trustee and that is not subject to the revesting provisions.

When does an asset revest?

Property will revest to the bankrupt six years after discharge. When that six year period commences will depend upon when the bankrupt estate commences. There are two possibilities for property disclosed in the Statement of Affairs:

1. for bankrupts who are discharged after 5 May 2003, the revesting date is six years after the date of discharge regardless of whether the bankruptcy commenced before or after 5 May 2003;
2. for bankrupts who were discharged before 5 May 2003, the revesting date was six years after 5 May 2003. That is, the revesting date was 5 May 2009 unless the revesting date was extended.

The earliest date that any property in any estate could have revested to any bankrupt was 5 May 2009, but in general it will be six years after discharge.

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. The revesting date for this property is six years after either the date of discharge or the date of notification, whichever is later.

There are two possibilities:

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

Again, the earliest date that after-acquired property revested to any bankrupt was 5 May 2009.

What happens when an objection to discharge is lodged?

The six year period for revesting starts with the discharge of the bankrupt, which may be up to five years after the normal date for discharge. That is, revesting may not occur until 14 years after the start of the bankruptcy.

If the 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 (the actual date of discharge), not the date that would have been the date of discharge if there had been no objection.

Can the trustee delay the revesting of property?

Yes. The trustee may issue an extension notice to the bankrupt during the unexpired six year period and extend the revesting period for a further three years after the "current" revesting period or three 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: 17.3.2010