Case Study: Implementing an Insolvency Program - FNSACC611

This assignment presents a case study on implementing an insolvency program, simulating the role of a trustee in bankruptcy. It outlines the steps involved in the process, beginning with the issuance of a sequestration order and the identification of the bankrupt's assets, including real property, motor vehicles, and business assets. The analysis includes the valuation of assets, determination of equity, and the trustee's actions to realize equity for unsecured creditors. The assignment also addresses the treatment of superannuation, income contributions, and the implications of acts of bankruptcy. Detailed calculations and references are provided, offering a comprehensive overview of the trustee's responsibilities and the legal framework governing insolvency proceedings. The case study provides practical insights into managing various asset classes and financial obligations within the context of bankruptcy law.

Implement An Insolvency Program 1
IMPLEMENT AN INSOLVENCY PROGRAM
By (Student’s Name)
Professor’s Name
College
Course
Date

Implement An Insolvency Program 2
IMPLEMENT AN INSOLVENCY PROGRAM
A. Steps by Trustee
Starts with issuance of sequestration order and subsequent identification of real property
owned by bankrupt and then:
 Valuation of the property
 Determine debt owing under mortgage or any equity possessed by bankrupt
 Establish property ownership status
Mike and wife jointly owned property and has fifty percent interest contributed to equity.
Equity computation:
450, 000.00-400,000.00= 50,000.00 (TE)
50,000.00/2=25,000.00 (50% equity that Mike owns)
25,000.00 - (trustee takes as distribution to unsecured creditors)
Realized equity by:
Agreeing with Mike’s wife to sell the property with fifty percent of net proceeds
taken to bankrupt estate and the remaining half being paid to Mike’s wife or sell the share of the
bankrupt (Mike) to Mike’s wife. The trustee would offer Mike’s wife to buy future rights in this
property at desirable sale price (Shapiro, Mackmin and Sams 2019).
B. Motor Vehicles
Payout amount exceeds the value of the vehicle hence no equity. Motor vehicle threshold
is inapplicable; (55,000.00-59,000.00=-4,000.00, no equity). Finance firm remains a secured
creditor. It can repossess the vehicle and sell it to recover 55,000. 00 (finance cost) at market
price. The balance (-4,000.00) is claimed as unsecured creditor to trustee-covering vehicle loss.

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Where Mike can arrange finance repayment, finance Company permits he retains vehicle and
Mike directly deals directly with Company (O'Brien, Anderson, Ramsay and Ali 2019).
C. Ford Falcon
The value of Ford Falcon is 10,000$. The trustee computes the interest of the owner by
deducting threshold allowance (7,600$) from motor vehicle as follows:
(10000-7600)$= 2,400$- this is the owners’ equity (beyond threshold amount)
The trustee is needed to realize 2,400$ equity as follows:
I. Taking ownership of vehicle and selling it-1st 7,600$ is paid to Mike as trustee retains
surplus
II. Agreeing to sell equity (2,400$) to a third party
The equity is small amount thus trustee enters into arrangement of selling equity to third
party. Mike’s wife can purchase equity for 2,400$-implying couple will retain vehicle at 7,600$
(threshold).
D. Business Assets
Trustee might take ownership of business assets (only debt owing not beyond debt
owing+ expenses) if Mike exceeds amount indexed. Mike operated consultancy with business
assets (office equipment; laptop) valued at 2,500$. Assets must be determined as “divisible
property” or “tools of trade.” If latter, Mike retains $3,700 threshold and retains assets (this case)
as trustee has no possession right (Bankrupt Act 1966, 3,700$ (s.116 (2) (c (i)) and R6.03B (1) &
(2).
E. Superannuation
Superannuation is not affected, and secures retirement provision of bankrupt. It stays safe
when it is normal contribution. Where Mike intentionally placed additional money into

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superannuation beyond previous five years in excess, it will be re-called back. Super remains
exempted from bankruptcy because it remains a divisible asset (Bankruptcy Act 1966 (s.128B
and 128C). The trustee will never recover any amount from superannuation (Hanrahan 2018).
F. Income Contribution
Taxable Income (TI) 95000.00
Less: G/tax [(95000.00-80000.00) *0.370] + 17547.00 (23097.00)
Less: M/L (95000.00*2.0%) (1900.00)
Net Income (NI) 70003.00
Less: Threshold 2 dependent (68683.2500)
1319.7500
Contribution to be paid ½ of 1319.750 659.880
Mikes income contribution liability {659.880/12.0} each
month
54.990
The 54.990$ contribution ends up with trustee as Mike pays it directly to trustee each month.
G. Act of Bankruptcy
I. Act of Bankruptcy (AoB) remains an all-inclusive term in bankruptcy law. A creditor
petitions a debtor for bankruptcy after determining that a debtor committed act of bankruptcy (6
months before presenting petition (Andersen 2018). Petition is only brought with insolvency
indication and when AoB remains insolvency pointer. S.40 (common definition) defines AoB
that 95% of cases fails bankruptcy notice compliance (as it is easy to prove) (s.40 (1) (g)).
II. Trustee’s role is to probe transaction above 1,000$ performed in previous 5-years.
Where shares stood transferred to Mike’s wife for no legitimate rationale, Trustee claims it.

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Relation-back doctrine maximizes available asset to Trustee and operates to bring property
possessed by bankrupt before sequestration order is made into bankrupt estate (Andersen 2018).

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References
Andersen, C., 2018. Legal Aspects of Asset Valuation on Copyright as Part of Boedel
(Countable-List) in the Process of Bankruptcy in Indonesia Following the Latest Copyright Law
Act No. 28/2014. Central European Journal of International & Security Studies, 12(4).
Hanrahan, P.A.M.E.L.A., 2018. Legal framework governing aspects of the Australian
superannuation system. Background Paper, 25.
O'Brien, L., Anderson, M., Ramsay, I. and Ali, P., 2019. More to Lose: The Attributes of
Involuntary Bankruptcy. Economic Papers: A journal of applied economics and policy, 38(1),
pp.15-26.
Shapiro, E., Mackmin, D. and Sams, G., 2019. Modern methods of valuation. Estates Gazette,
12(7), pp. 12-56.