Dan ran a motor mechanic business as a sole trader but the business has not been going well for some time. He has been paying some accounts with bankcard credit but knows this cannot continue. Last year, he gave his vintage car that he was doing up in his spare time to his son for his birthday on the 12 April 2015. His son said he will look after it and that Dan was welcome to continue to come round to the son’s place and continue to work on it. Dan also sold his house to his daughter on 12 June 2015 for half of its value, as his daughter needed somewhere to live but could not afford a house.

By December 2015 Dan could not pay his debts. As a last deed, he paid his most loyal creditor, his spare parts supplier on 23 rd December 2015. On 2nd January 2015, Dan withdrew all the money he had in the bank, bought a one- way ticket to Bahamas and left no forwarding address. He left four unsecured creditors who he owes $25,000 between them.

(a) The unsecured creditors need to decide if they should put Dan into bankruptcy.

What are the advantages and disadvantages of doing this?

(b) Presume that the unsecured creditors decide to start bankruptcy proceedings.

A creditor’s petition is presented on 2nd August 2015 and the Sequestration order is made on 2nd September 2015.

(i) On what date did Dan’s bankruptcy commence and how do you know this?

(ii) What property is available to creditors? In particular can the vintage car, the house and the payments to the spare parts supplier be recovered for the benefit of the creditors? Explain your answer citing relevant sections of the legislation.