Consequences of Bankruptcy for Builders and Property Agents
When a person petitions for bankruptcy via a debtor's petition or is petitioned for bankruptcy by a creditor by way of a creditor's petition, it is commonly understood that the bankrupt faces significant restrictions during the three (3) year period during which the debtor remains an "undischarged bankrupt". There restrictions include, amongst other things, not being able to keep a vehicle or tools of trade or property for earning an income in excess of a value exceeding the prescribed amounts set out in the regulations to the Bankruptcy Act 1966 (Cth) ("Bankruptcy Act") and not being able to earn an income of more than the prescribed amount without being required to make contributions to creditors of fifty cents on every dollar of income after tax.
What is less commonly understood are the consequences for builders, property agents and certain other licence holders of becoming bankrupt. Bankruptcy for these individuals can carry consequences that reach far beyond the initial three (3) year period during which time the person is classified as an undischarged bankrupt.
Individuals holding a Building Services Authority ("BSA") licence are perhaps most seriously affected by bankruptcy and alternatives to bankruptcy such as entering into a personal insolvency agreement ("PIA") under Part X of the Bankruptcy Act, which are deemed to be "relevant events" classifying the person an "excluded individual" under the Queensland Building Services Authority Act 1991 (Qld) ("QBSA Act") and thereby precluding the person from holding a BSA licence for a period of five (5) years from the date that the person became a bankrupt or entered into a PIA or similar arrangement. While these individuals can apply to the BSA to be classified as "permitted individuals" under the relevant provisions of the QBSA Act if they can show that they took all reasonable steps to avoid the occurrence of the circumstances that gave rise to the bankruptcy, recent case law has shown that this is a very difficult threshold to satisfy where the individual has taken advantage of bankruptcy laws to absolve himself or herself of a debt when any type of alternative option exists such as, for example, entering into a payment plan with creditors or liquidating assets to discharge liabilities.
Similarly, property agents and motor dealers licensed under the Property Agents and Motor Dealers Act 2000 (Qld) are generally not considered to be "suitable" persons to hold a licence while they are an undischarged bankrupt or if they have entered into a PIA or are otherwise "affected by a bankruptcy action". Irrespective of whether the bankrupt has been discharged or the PIA fully administered, any such persons must provide the following in support of any licence application:
- a description of the circumstances that caused the person to go into bankruptcy;
- a description of the steps taken by the person to avoid going into bankruptcy;
- list of creditors and amounts owing to each creditor as at the date of bankruptcy;
- confirmation of whether any charges were laid against the person in regard to the bankruptcy; and
- if not self-employed, a letter from the person's employer, on the employer's letterhead, outlining the person's role within the business and whether the person would be in a position to influence the management of the licensee's business.
Given the importance to licence holders of maintaining their licences which is often their only means to earning an income and a livelihood, we strong recommend that any such individuals affected by a bankruptcy action contact John Ramsden on (07) 5592 1921 to discuss available options and the best method to adopt when making an application for a licence to a relevant government body in the aftermath, or during the course, of a bankruptcy action.
 Queensland Building Services Authority Act 1991 (Qld), section 56AC.
 Younan v QBSA  QDC 158.
 Property Agents and Motor Dealers Act 2000 (Qld), section 26.
"For more information and advice about this topic, please call our office to speak with one of our experts in this area".
By Shanan John Ramsden Lawyer and Managing Partner of Ramsden Lawyers.
15 Nov 2012