PROCESSES TO END BANKRUPTCY

Automatic discharge

Most bankrupts will be discharged automatically three years and one day after the date the statement of affairs is filed provided no objection has been lodged [Bankruptcy Act 1966 (Cth) s 149]. After discharge, the bankrupt continues to be liable for fines or debts incurred by fraud, and for debts under a maintenance order, although the court has the power to release a bankrupt from liability to pay child support arrears [s 153].

Objections to discharge

Objections may be lodged by the trustee on a number of grounds which will extend the period of bankruptcy to a total of five or eight years [Bankruptcy Act 1966 (Cth) ss 149A-D].

Where the ground for lodging an objection relates to uncooperative conduct by the bankrupt (one of the ‘special grounds’ listed in the Act), the trustee will not have to provide a reason for lodging an objection. Previously, the trustee always had to provide reasons.

A bankruptcy will be extended to five years if the bankrupt failed to:

  • disclose a debt existing at the date of bankruptcy
  • advise the trustee of any change of name, address and telephone number [s 80]
  • sign a document at the trustee’s request
  • attend a meeting of creditors without reasonable excuse or approval of the trustee
  • attend an interview or examination without reasonable explanation
  • disclose an interest in property.

A bankruptcy will be extended to eight years if the bankrupt:

  • left Australia and did not return
  • failed to return to Australia despite being asked to do so by the trustee
  • unlawfully continued to manage a corporation
  • obtained goods, services or money to a value of $4669 or over without disclosing the bankruptcy
  • disobeyed a request from the trustee for information about property or income
  • did not disclose a source of income in their statement of affairs or during the bankruptcy [ss 6A(1),139U]
  • failed to pay contributions to the trustee or explain how money was spent.
  • failed to explain adequately the disposal of property
  • failed to explain the purpose for which money was spent

Annulment

If all the debts are paid the trustee will annul the bankruptcy. Annulment takes place when the payment, or last payment, is made including interest on interest bearing debts [Bankruptcy Act 1966 (Cth) s 153A].

The court can also annul the bankruptcy if satisfied that a sequestration order ought not to have been made or where a debtor files their own petition (where the petition ought not to have been presented) is accepted by the Official Receiver [s 153B].

Legal advice should be sought from a private lawyer about options for annulment of bankruptcy.

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