Gratuitous alienation
This applies to all personal insolvency solutions.
A ‘gratuitous alienation’ is when property owned by the client is transferred to another person for free or less than its worth.1s98 B(S)A 2016 For example, if a client passed ownership of a house or vehicle to a spouse or family member before bankruptcy in an attempt to hide it. The trustee can challenge an alienation which took place up to five years before the date of sequestration if the person receiving the alienation is a close family member or associate. If the person receiving the alienation is not an associate of the client, the time limit is two years. Remember, if a client owns property, they do not qualify for MAP.
If a trustee discovers that assets have been transferred, they can pursue the asset through the court, gain a decree of reduction and return it to the client’s estate.
They can pursue both assets and money derived from the sale of assets.
An alienation can also be challenged by the creditors if they have information to that effect.
The court will not grant decree of reduction if:
•immediately, or at any other time, after the alienation, the client’s assets were greater than their liabilities; or
•the alienation was made for adequate consideration; or
•the alienation was:
◦a birthday, Christmas or other conventional gift; or
◦a gift made, for a charitable purpose, to a person who is not an associate of the client;
◦a gift which, having regard to all the circumstances, it was reasonable for the client to make.