The most common claims pursued by trustees include

Undervalued transactions

These claims commonly occur when a debtor is aware that they will soon be declared bankrupt. They transfer their valuable assets or money to a related party at an undervalue in attempt to conceal it from becoming part of the Bankrupts’ estate.

Under Section 120 of the Bankruptcy Act 1966 (“The Act”), the related party can be the subject of recovery actions by a Bankruptcy Trustee to receive fair market value for the assets.

Transfers to defeat creditors

This is where a person (who is subsequently declared bankrupt) transfers property to another

person with an intention to protect that property from becoming a part of their Bankrupt Estate and subsequently being distributed to creditors or with an intention to defeat or delay the proper distribution of that property to creditors.

Under Section 121 of The Act, the third party can be the subject of recovery actions by a Bankruptcy Trustee to recover assets rightfully belonging to the bankrupt’s estate.

Third Party Transactions

This is where a transfer of property has taken place between two parties (the Bankrupt and the transferee) and subsequently, the transferee gives some or all of the consideration for that transfer to a third party.

Under Section 121A of The Act, the third party can be the subject of recovery actions by a Bankruptcy Trustee where that consideration should have been paid to the Bankrupt.

Avoidance of preferences

Preferences occur where a creditor has received an advantage over other creditors, by receiving payment (or other type of transaction) for their outstanding liabilities and does so in circumstances where they knew, or ought to have known, that the Bankrupt was insolvent.

Under Section 122 of The Act, the creditor can be the subject of recovery actions by a Bankruptcy Trustee to recoup the funds received by them.

Debts

These claims arise when there is a debt owing to the Bankrupt by an independent third party.

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