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02 Apr 2012

The Price of Burying your Head in the Sand is.....?


2 min

Debtors are expected to pay their bills when they can, but what about when they can pay but refuse to do so? This is the position with a bankrupt estate being handled by Jason Bettles (Worrells Gold Coast) where a body corporate has obtained a sequestration order against a unit owner because of the owner’s refusal to pay any body corporate fees.

A strata title property was purchased in 2006 with inheritance money, meaning the title over this property is unencumbered. This is certainly an enviable position to most. But six years later the owner is bankrupt as a result of the Body Corporate for this Community Titles Schemes action, with a claim of over $33,000 of outstanding levies for the entire period of ownership. Jason’s investigations have also found that at least 3 years of outstanding council rates are also owing, totalling around $11,000.

Where a bankruptcy trustee anticipates that there will be sufficient funds to pay all claims and expenses the proper course is to manage the estate so that costs are kept to a minimum. One difficulty facing Jason is that he does not know the extent of any other liabilities the bankrupt may have as the bankrupt also has refused to lodge his statement of affairs. Also Jason has been unable to discuss the matter with the bankrupt despite calling in person at his home.

Despite Jason keeping the lawyer acting for the council informed of our actions and intentions, the council has resolved to sell the property. In their words, this means that unless somebody pays the $11,000 in rates they will be auctioning the property regardless of the bankruptcy. The kicker is that they don’t have to sell the property at market value, only for the rates plus the body corporate levies owed.

The bankrupt would have always had to pay the body corporate fees and the council rates, now because of his inexplicable lack of cooperation he will also have to pay an estimated $30, 000 in bankruptcy and legal costs.

This case illustrates that the Bankruptcy Act can be used to force debtors to pay at their cost, even when they’re in a powerful state of denial.

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