Media reports of high profile court cases involving well-known people who have declared bankruptcy have created some urban legends around what is actually a very complex issue. Everyone knows someone who knows someone else who moved their assets from here to there, declared bankruptcy and walked away without paying their creditors a cent. Who knows how these stories circulate but the myths have continued to thrive around the issue of bankruptcy
Courts Look at all Contributing Circumstances
A common myth is that if the bankrupt has not held an asset for some time, it might be protected from being transferred to the bankruptcy trustee. In a 2006 judgement, the court found that the transfer of property in 1993, when all circumstances were taken together, inferred that the purpose of the transfer was to bypass creditors and it was set aside. The courts look at all circumstances surrounding the issue, and not just at the time that elapsed between the transfers and the bankruptcy declaration.
Affinity Accounting Plus takes the protection of clients’ assets seriously. People come to them for advice regarding the best ways to protect their investments. This group of professional tax accountants ensure that they have taken every possible risk into consideration, including bankruptcy, when recommending strategies for asset protection.
Another bankruptcy myth is that it is difficult for a trustee to establish the main purpose behind the transaction. In 2004, the estate of a deceased bankrupt sought the transfer of assets back to the estate so they were available to creditors. The court found that the intention to defeat creditors would be inferred where the effect of the alienation of the property would be to make insufficient funds available to creditors. The trustee was not required to provide direct evidence.
Courts Hold that Bankruptcy Laws Must Operate for Benefit of all Creditors
In 2011, the courts strengthened the bankruptcy legislation by finding that it must operate for the benefit of all creditors at the time of bankruptcy. The myth that the only creditors to be considered were those who had claims against the bankrupt at the time of a property transfer was defunct. In an earlier case, the bankrupt argued that he could only have a ‘main purpose’ to hinder or delay the process of making property available if he had creditors. The court disagreed and again took into consideration all the circumstances behind the scenes.
The effect of these court decisions is that not all asset protection strategies may be effective in the event of bankruptcy. Small business owners use the services provided by Affinity Accounting Plus to help them protect their hard-earned wealth. Their professional advisors are well aware that these cases have set some fairly stringent precedents, and take them into account when assisting clients to develop wealth protection strategies.
Markets and many other factors change quickly and affect return on investments so it is vital to have a team on your side to help protect your hard-earned assets. Their website at www.affinityplus.com.au has more details.
