BANKRUPTCY ACT 1966

PART VI - ADMINISTRATION OF PROPERTY  

Division 3 - Property available for payment of debts  

Subdivision A - General  

SECTION 118   EXECUTION BY CREDITOR AGAINST PROPERTY OF DEBTOR WHO BECOMES A BANKRUPT ETC.  

118(1)   [Creditor to pay bankrupt ' s estate]  

Subject to subsection (2), where:


(a) a creditor has, within 6 months before the presentation of a petition, or after the presentation of a petition, against a debtor:


(i) received moneys as a result of execution having been issued by him or her, or on his or her behalf, against property of the debtor, being moneys that are the proceeds of the sale of property of the debtor that has been sold in pursuance of the process or that were seized, or paid to avoid seizure or sale of property of the debtor, in pursuance of the process; or

(ii) received moneys as a result of the attachment by him or her, or on his or her behalf, of a debt due to the debtor; and


(b) the debtor subsequently becomes a bankrupt on, or by virtue of the presentation of, the petition;

the creditor shall pay to the trustee of the estate of the bankrupt the amount by which the amount of those moneys exceeds the taxed costs of the execution or attachment, as the case may be.

118(2)   [Exception]  

Subsection (1) does not apply in relation to a creditor who has received moneys as a result of execution having been issued by him or her, or on his or her behalf, against property of a debtor, or as a result of the attachment by him or her, or on his or her behalf, of a debt due to the debtor, in respect of any liability of the debtor under a maintenance agreement or maintenance order (whether entered into or made, as the case may be, before or after the commencement of this section).

118(3)   [Creditor may prove for his debt]  

Where a creditor has, in pursuance of subsection (1), paid the proceeds of the sale of property or other moneys to the trustee of the estate of a bankrupt, the creditor may prove in the bankruptcy for his or her debt as an unsecured creditor as if the execution or attachment, as the case may be, had not taken place.

118(4)   [Proceeds from execution by creditor]  

Where:


(a) a creditor has, in pursuance of subsection (1), paid to the trustee of the estate of a bankrupt the proceeds of the sale of property or other moneys that were received as a result of execution having been issued by him or her, or on his or her behalf, against property of the bankrupt or of the attachment by him or her, or on his or her behalf, of a debt due to the bankrupt; and


(b) that property or debt would not have been property divisible amongst the creditors of the bankrupt if the bankrupt had become a bankrupt immediately before the execution was issued or the debt was attached, as the case may be;

the trustee shall pay those proceeds or other moneys to the bankrupt or to a person authorized by the bankrupt in writing for the purpose.

118(5)   [Procedure on notice of creditor ' s petition]  

Subject to this section, where notice in writing of the presentation of a creditor ' s petition against a debtor is given to a creditor:


(a) the creditor shall not take any action or further action, as the case may be, to attach a debt due to the debtor until the petition has been dealt with by the Court or has lapsed; and


(b) if a debt due to the debtor has been attached by the creditor:


(i) the creditor shall forthwith give a written notice of the presentation of the petition to the person liable to pay that debt; and

(ii) the attachment of the debt is suspended until the petition has been dealt with by the Court or has lapsed.

118(6)   [Procedure on reference to Court of a debtor ' s petition]  

Subject to this section, where notice in writing of the reference to the Court of a debtor ' s petition against a debtor is given to a creditor:


(a) the creditor shall not take any action or further action, as the case may be, to attach a debt due to the debtor until the Court has dealt with the petition; and


(b) if a debt due to the debtor has been attached by the creditor:


(i) the creditor shall forthwith give a written notice of the presentation of the petition to the person liable to pay that debt; and

(ii) the attachment of the debt is suspended until the Court has dealt with the petition.

118(7)   [Debts to be paid to debtor]  

Nothing in this section shall be taken to prevent a person liable to pay a debt to a debtor from paying the debt or a part of the debt to the debtor during the suspension, in accordance with subsection (5) or (6), of an attachment of that debt.

118(8)   [Contempt]  

A creditor who contravenes, or fails to comply with, subsection (5) or (6) is guilty of contempt of court.

118(9)   [Where charge becomes void]  

Subject to subsection (10), where:


(a) a creditor has, within 6 months before the presentation of a petition, or after the presentation of a petition, against a debtor obtained a charge or charging order against property of the debtor; and


(b) the debtor subsequently becomes a bankrupt on, or by virtue of the presentation of, the petition;

the charge or charging order, as the case may be, is void as against the trustee in the bankruptcy.

118(10)   [Maintenance agreement or order]  

Subsections (5), (6) and (9) do not apply in relation to the attachment of a debt due to a debtor, or to a charge or charging order against property of a debtor, in respect of any liability of the debtor under a maintenance agreement or maintenance order (whether entered into or made, as the case may be, before or after the commencement of this section).

118(11)   [Acquisition of good title to property]  

Notwithstanding anything contained in this Act, a person who purchases property in good faith:


(a) under a sale by a sheriff in consequence of the issue of execution against property of a debtor who, after the sale, becomes a bankrupt; or


(b) under a sale in consequence of the enforcement by a creditor of a charge or a charging order against property of a debtor who, after the sale, becomes a bankrupt;

acquires a good title to it as against the trustee of the estate of the bankrupt.

118(12)   [Interpretation of " charge " and " charging order " ]  

In this section:

charge
means a charge created by a law of the Commonwealth or of a State or Territory of the Commonwealth upon registration of a judgment in any registry.

charging order
means a charging order made by a court in respect of a judgment.




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