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It’s personal – Bankruptcy and Life Insurance

By Andrew Ng an Associate of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group.

It is a long standing principle that a bankrupt should not be deprived of a right to recover compensation for injury or wrong done to the bankrupt as it would be “unjust and harsh that the estate of the bankrupt and the participating creditors should be swelled and advantaged by a wrong to the person or reputation of the bankrupt” (Moss v. Eaglestone [2011] NSWCA 404 per Allsop P at [64]) . This principle underpins the intention of the statutory framework set out in section 60(4) and section 116(2)(g) the Bankruptcy Act 1966 (Cth) (“the Act”).

Section 116(2)(g) of the Act excludes from property that is divisible among a bankrupt’s creditors any right of the bankrupt to recover damages or compensation for personal injury or wrong done to the bankrupt and any damages or compensation recovered by the bankrupt in respect of such an injury or wrong.
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