Hi there. If you are owed money or property by an individual who has entered bankruptcy, you cannot continue to claim that debt directly from them. Once the individual enters bankruptcy, a trustee is appointed to manage the bankrupt estate and make payments to creditors if funds become available.

As an unsecured creditor, you may be eligible to receive payments from the trustee (called ‘dividends’) from the sale of assets or compulsory payments from the bankrupt person. If funds become available, creditors must lodge a ‘proof of debt’ with the trustee and, if requested, a statutory declaration confirming the details of the debt.

Once the bankruptcy ends (usually three years), creditors’ debts are released or extinguished. This means that an unsecured creditor cannot continue to pursue the debt, regardless of whether they recovered any money via a dividend during the bankruptcy.

The above information assumes the seller in your situation was a sole trader conducting business in his personal capacity, rather than through a company. If the seller was a company, the process for claiming and proving debts is slightly different.

Suggested way forward

You should contact the trustee of the bankrupt individual to find out more information and register your claim. If you do not know the trustee’s details, you can complete a Bankruptcy Register Search on the Australian Financial Security Authority website (www.afsa.gov.au). For more detailed advice on recovering your property or money, you should speak to a lawyer. By pressing the “Consult a Lawyer” button, LawAdvisor can help you search for experienced lawyers and obtain fee proposals for their services. Costs for legal advice and representation will vary between providers based on experience and the scope of services.