When does an individual become discharged from bankruptcy?
If you have voluntarily become bankrupt by presenting your own petition, you will be discharged three years and one day after you filed the petition and your statement of affairs with the Australian Financial Security Authority (‘AFSA’).
On the other hand, if you have become bankrupt by a sequestration order of the court, then you will become due for discharge three years and one day after AFSA accepts your completed statement of affairs. If you fail to lodge a statement of affairs, the bankruptcy will continue until the date of your death. Therefore, it is essential that you lodge your statement with AFSA as soon as possible because any delay may prolong the period you remain bankrupt.
It is important to note that in some cases your bankruptcy may be extended to five or eight years. This occurs where your trustee lodges an objection to your discharge.
Can an individual get out of bankruptcy prior to being discharged?
Yes, a bankruptcy can be annulled. An annulment acts as a cancellation of the bankruptcy. A bankruptcy may be annulled in three ways:
- By you paying your debts in full (including interest, the realisations charge and trustee’s expenses and fees);
- By your creditors accepting a composition or arrangement (generally an offer of something less than payment in full, also referred to as a section 73 proposal);
- You successfully obtain a court order annulling your bankruptcy.
When would a court award an annulment of a bankruptcy?
A court will annul a bankruptcy if you are successfully able to demonstrate that the bankruptcy should never have been commenced. This will occur when:
- The proper legal process is not followed in initially bankrupting you
- You are actually solvent (able to pay your debts when they fall due)
- There was no actual outstanding debt to the petitioning creditor at the time
If you require any further information or assistance in regards to bankruptcy, contact the team of lawyers and accountants at The Quinn Group on (02) 9223 9166 or submit an online enquiry.