19 June 2006

Australia Limits Asset Protection

The U.S. Bankruptcy Code was recently amended and one of the many changes involve limit the benefit of what are called "fraudulent transfers" (i.e. asset transfers designed to avoid creditors).

Australia's new bankruptcy code amendments have taken similar measures which are in many respects more direct, cutting through the Gordian knot of legal doctrine behind many such methods, in what could be a model for American lawmakers:
[T]he new laws allow a trustee in bankruptcy to sell the family home on behalf of creditors even if only one spouse declares bankruptcy and regardless of whose name is on the title to the property. Moreover, the amendments double the time period in which a bankruptcy trustee may access the bankruptcy assets from 2 years before the filing of bankruptcy to 4 years for “under market” transactions, which are generally assets that are transferred to relatives, including a spouse, through a gift or a sale for less than market value.
The law also allows a court to look through the title of property to consider who contributed financially to its purchase and maintenance.

Some of biggest impacts are predicted to be on business debts from businesses with no limited liability protection, and in creating an incentive to share business income with a spouse so that both will have contributed financially to household expenses, so a house is not fully attributed to an earner spouse.

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