Bankruptcy Act 1966

When the debtor’s property becomes subject to control under this Division, the debtor’s property is charged with:

the debtor’s unsecured debts at the time the debtor signed the authority under section 188; and

any amount by which the debtor’s secured debts exceeded the value of the property secured for payment of the debts at the time the debtor signed the authority under section 188.

Subject to subsections (3) and (9), the charge is not affected by any change of ownership of the charged property.

The charge created by subsection (1) is subject to:

any charge or encumbrance that was on the debtor’s property immediately before the debtor signed the authority under section 188; and

any charge or encumbrance acquired in good faith and for market value by a person who did not have notice of the charge created by subsection (1).

The charge created by subsection (1) has priority over a charge or encumbrance that is not described in subsection (3).

The controlling trustee may register a charge created by subsection (1) over particular property if a law of the Commonwealth, or of a State or Territory, provides for registration of a charge over that sort of property.

If the trustee registers the charge over particular property, a person who acquires the property or an interest in the property after the charge is registered is taken to have notice of the charge for the purposes of subsections (3) and (9).

The controlling trustee may sell property that is subject to a charge under subsection (1).

Any proceeds from the sale of charged property that are not needed to meet a charge or encumbrance that has higher priority than the charge created by subsection (1) are the debtor’s property.

A charge created by subsection (1) ceases to have effect in relation to property if the property is acquired by a person:

in good faith for consideration at least as valuable as the market value of the property without notice of the charge; or

from the controlling trustee in a sale under subsection (7).

Unless it has already ceased to have effect under subsection (9), the charge ceases to have effect when control of the debtor’s property ends under subsection 189(1A).

In this section: