With the introduction of the Bankruptcy and Family Law Legislation Amendment Act 2005 (Cth)(the Amendment) afforded non-bankrupt spouses greater protections in property proceedings with the insertion of the s 59A provisions into the Bankruptcy Act. The provisions provides that ss 58 and 59, being the vesting sections, are subject to orders made under Pt VIII of the Family Law Act 1975 (the FLA). So what does that exactly mean? Well, what it essentially signifies is that the income of the bankrupt does not vest in the trustee, therefore, allowing a non-bankrupt spouse the ability to seek maintenance from a bankrupt spouse.
“Although, there is a general rule, it is not absolute, is not prescribed by statute and there are a number of well recognised exceptions. There is no requirement of that the rights of an unsecured creditor or a claim by a third party must be considered and dealt with prior to the Court making an order under sec 79, nor is there a rule of priority as between a creditor claimant and a spouse. Those rights, however, cannot be ignored. They must be recognised, taken into account and balanced against the rights of the spouse.”
Under the provisions of s 79(12) of the FLA, there will be certain circumstances where a trustee in bankruptcy must be joined to the proceedings, and the bankrupt needs to obtain leave in order to make submissions if the trustee is a party.