Unlike companies, when an individual becomes insolvent, their insolvent estate is usually resolved through bankruptcy. An insolvent person may declare themselves bankrupt, otherwise, a creditor may apply to Court for an order declaring a person bankrupt due to unpaid debt. Accordingly, we are appointed Trustee in Bankruptcy either by the Court or by the Insolvent individual nominating us.
The role of the Trustee is similar to that of a Liquidator of a Company in that the Trustee realizes available assets for the benefit of the Bankrupt’s creditors.
However, the Bankruptcy Act allows the individual to retain certain personal assets (such as essential household furniture and effects, a motor vehicle to a certain value, and tools of the trade), as well as earn an income to a certain level before contributions must be paid to the Trustee.
The proceeds from the realization of assets and income contributions are distributed by the Trustee to the Bankrupt’s creditors.
A person remains bankrupt for 3 years and is prohibited from doing certain things during this time including obtaining credit and managing a business or company. If the Bankrupt does not comply with his/her obligations, then the bankruptcy can be extended beyond the minimum 3 year period.