A Trustee in bankruptcy must regularly turn their mind to two questions when assessing what income contributions are payable by a bankrupt. Those questions are:

1.    Who is a dependant; and

2.    Do they reside with the bankrupt?

Dependant

The amount payable by the bankrupt will depend on numerous factors including how many dependants the bankrupt has for each Contribution Assessment Period (“CAP”). The greater the number of dependants, the higher the actual income threshold amount is available to the bankrupt before income contributions are required.

Just because a person is a dependant for one CAP does not automatically mean they are a dependant for all CAPs and as such the assessment is made for each CAP.

Section 139K  of the Bankruptcy Act defines a dependant as:

“Dependant”, in relation to a bankrupt in relation to a contribution assessment period, means a person who satisfies all the following conditions:

(a)  the person resides with the bankrupt;

(b)  the person is wholly or partly dependent on the bankrupt for economic support;

(c)  the income derived (or likely to be derived) by the person during the contribution assessment period is not more than the amount prescribed by the regulations for the purposes of this paragraph.

An issue arises where someone is dependant for part of a CAP period. By way of example, a child may move out and obtain employment becoming self-sufficient 10 months into a CAP. The Act does recognise persons as dependants if they are not dependant for the whole of the CAP period. So our child that is a dependant for 10 months is not recognised as a dependant for the whole of the CAP period.

The concept of partial dependancy is only relevant under (b) where the individual is partly dependant on the bankrupt for economic support as opposed to being dependant for part period of the CAP. Being partially dependant on the bankrupt and partially dependant on a third party does not affect the dependency status.

Resides

The other aspect that requires consideration is does someone “reside” with the bankrupt. It is common in today’s society to find shared parenting, blended families and other circumstances where parents or caregivers do not necessarily reside under the same roof.

These circumstances give rise to the Trustee having to consider whether a dependant resides with a bankrupt. Such consideration is given without there being any definition of “reside” under the Bankruptcy Act. Rather a Trustee may look to the ordinary meaning of that word and case law under other Acts.

It is possible and even probable for an individual to reside at more than one location. Each case will need to be considered on its facts. It is permissible for the dependant to reside for only part of a CAP and unlike the negative issue of being dependant for only part of a CAP, residing for part of a CAP is perfectly acceptable.