Criminal offences under the Bankruptcy Act

The Bankruptcy Act creates criminal offences that can arise from the behaviour of the bankrupt before and during bankruptcy. In some cases, this behaviour would not have been considered an offence if the debtor had not bankrupted (e.g. gambling). Prosecution for bankruptcy offences can lead to a fine or a prison sentence.

The Bankruptcy Act defines a number of offences – generally relating to acts of fraud or recklessness – that have led up to the bankruptcy or that are committed during the bankruptcy.

• Types of offences

  Offences under the Bankruptcy Act include:

  • materially contributing to, or increasing the extent of, insolvency by gambling or rash and hazardous speculation (s 271);

  • obtaining, after the date of bankruptcy, credit of $7046 (as at September 2024) or more without disclosure of the bankruptcy (ss 269(1)(a), (aa), (ab), (ac), (ad), 304A(1)(j));

  • leaving Australia with intent to defeat creditors, or without obtaining a court order where required;

  • incurring, within two years before the date of bankruptcy, a debt without any reasonable expectation of repayment (s 265(8));

  • obtaining credit or property by fraud after bankruptcy;

  • failing to disclose to a trustee particulars of any disposition of property made in the two years before the date of bankruptcy;

  • disposing of property before bankruptcy with intent to defraud creditors;

  • disposing of property after bankruptcy;

  • concealing property intending to defraud creditors;

  • failing to deliver property divisible among creditors;

  • failing to attend before the Official Receiver (AFSA) when requested;

  • obstructing a person with intent to defeat the seizure of property;

  • failing to deliver up books of account and other records;

  • failing to comply with a supervised account notice; and

  • failing to deposit income into a supervised account.

• Penalties

  A debtor who has committed an act that is an offence under the Bankruptcy Act and who is considering bankruptcy should check both the maximum penalty for the offence and the probable penalty.

• Details of prior prosecutions

  AFSA’s annual reports contain details of prior prosecutions and the penalties imposed.

  Whether a bankrupt is prosecuted for an offence, and the type of penalty imposed, depends on a variety of factors including the seriousness of the offence and the extent of the bankrupt’s indebtedness.

  A debtor need not reject the option of bankruptcy because a potential offence has been committed. Even if convicted, it might be worth paying the penalty in order to be released from the demands of creditors.

Criminal offences under the Bankruptcy Act

Chapter: 5.3: Understanding bankruptcy

Contributor: Paul Latimer, Adjunct Professor, Swinburne Law School; Volunteer lawyer, Fitzroy Legal Service

Current as of: 1 September 2024

Law Handbook Page: 331

Next Section: The process of going bankrupt