INS9508 - Bankruptcy
Transactions at Undervalue
A trustee may apply to the Court to have a transaction by the
bankrupt made void when the
- bankrupt made the transaction at undervalue
- transaction took place in the two years before the
presentation of the bankruptcy petition
- transaction took place between two and five years
before the presentation of the bankruptcy petition and at the time
of the transaction the bankrupt was insolvent or became so as a
result. If the transaction is with an associated person, then
insolvency is presumed and it is for the bankrupt to demonstrate
- The Court may, if it thinks fit, make an Order to
restore the position to what it would have been if the bankrupt had
not entered into the transaction.
A preference given by a bankrupt to one creditor to the
disadvantage of other creditors may also be set aside when the
- (not at undervalue) was given in the two years
before the presentation of the bankruptcy petition, and
- was given to a person who is an associate of the
- was given in any other case in the six months
before the presentation of the bankruptcy petition.
With an associate, there is a presumption of a desire to prefer.
In other cases, it is necessary for the trustee to demonstrate to
the court that the bankrupt was influenced by a desire to prefer.
This is not always a simple matter.
When the trustee’s reports indicate that the
debtor’s assets are less than those disclosed on your
- check other Revenue sources such as
- the District Valuer, Valuation Office Agency
- the assessing office tax file.
Also consider checking Equifax or Experian (have a word with the
- Draw the trustee’s attention to the
difference, as appropriate.
A trustee’s approach to creditors might include a request
for a guarantee of costs to challenge the transaction.