No one ever wants to reach the stage of bankruptcy, but once you are there, is there any way out?
Automatic Discharge from Bankruptcy
Bankruptcy usually ends three (3) years after you lodge your Statement of Affairs, but the bankruptcy period can be much longer if your Statement of Affairs is not lodged in a timely manner.
If you initiated your bankruptcy and lodged your own application with AFSA (the government agency who regulates personal bankruptcy in Australia), then your Statement of Affairs would have been lodged at the same time, which means the 3 year time period will run from the date that AFSA processed your bankruptcy application.
If your bankruptcy was initiated by a creditor through the Courts, then it is your responsibility to file and lodge a Statement of Affairs with your Trustee in Bankruptcy. If you never completed a Statement of Affairs then your bankruptcy will run indefinitely.
Getting out of bankruptcy early
There are three ways in which you can annul your bankruptcy so you do not have to wait the full 3 year period.
- Putting a Proposal to your Creditors
You can put a proposal to your creditors (via your bankruptcy trustee) under section 73 of the Bankruptcy Act. Once you lodge your proposal with your Trustee he or she will need to write a report and call a meeting of your creditors. Creditors need to benefit from the proposal so they will receive more than if the bankruptcy were to continue for the full 3 year period. In this regard, your Trustee in Bankruptcy will need to prepare a report to your creditors setting out his or her opinion as to whether the proposal is in the best interest of your creditors. For the proposal to be passed, the majority of creditors (representing more than 75% in value and 50% in number of creditors) must vote in favour of it.
If the creditors accept your proposal, your bankruptcy is annulled.
- Apply to Court
You can apply to court to have your bankruptcy annulled but you will need to demonstrate to the court that you are solvent and can pay all of your debts in full.
- Paying off all debts in full
The last option is to pay your Trustee in Bankruptcy sufficient funds for him or her to pay all of your creditors in full.
If you need expert bankruptcy advice, please call Insolvency Services Australia on 1800 003 883.