Recently a debtor experiencing financial problems sought the advice of a debt counselor and subsequently executed a s188 Authority appointing two partners from Worrells as his Controlling Trustees pursuant to Part X of the Bankruptcy Act. Unbeknown to the debtor, he may have been an undischarged bankrupt at the time.
Generally speaking a bankruptcy lasts for three years, however it will not end earlier than three years from the date the bankrupt’s Statement of Affairs is lodged with the Official Receiver (s149). In this instance our debtor was made bankrupt over 20 years ago however no Statement of Affairs was lodged and hence his bankruptcy continued over the years.
The first question is whether a debtor can appoint a Controlling Trustee if he or she is an undischarged bankrupt. The answer appears to be yes. Section 188 of the Act does not prohibit an undischarged bankrupt from doing so. This makes sense for many reasons. One of which is that you can have multiple bankruptcies in effect at any one time, so why not a Controlling Trusteeship and a bankruptcy.
Secondly, there are different creditors and different property available to those creditors in the different estates. Section 59 of the Act deals with which estate is entitled to the property available in the case of multiple bankruptcies, however this section appears not to extend to a debtor’s property when in a Controlling Trusteeship.
In cases where a Controlling Trustee is also appointed the debtor’s divisible property, which includes after acquired property, vests in the debtor’s Bankruptcy Trustee. In this case he was appointed more than 20 years ago.
It is rarely relied upon in practice, but section s127 of the Act imposes a limitation on the Trustee in Bankruptcy to make a claim to divisible property in the estate no later than 20 years from the date of bankruptcy.
In our case over twenty years had passed since the date of bankruptcy and no claim had been made by the Trustee in bankruptcy. Therefore the property should be dealt with in the Controlling Trusteeship and should be available to meet the claims provable in the current administration.
In hindsight the bankrupt should have lodged a Statement of Affairs early in his bankruptcy and this would not have been an issue. It still raises interesting points though as to how property is dealt with and who has control of it when more than one estate is in operation for one individual, particularly when one of them is a Controlling Trusteeship.