When does bankruptcy end?

21 Jan

Written By For Good Digital

Bankruptcy usually lasts for three years after the date the bankrupt files the statement of affairs. The discharge is automatic unless the trustee files an objection to the discharge and the objection has ‘taken effect’ (see ‘Objections to discharge’, below).
Either the Official Receiver (AFSA) or the trustee can file a written objection to discharge of the bankruptcy.
If the objection ‘takes effect’, the bankruptcy will be extended to either five or eight years, depending on the grounds for objection. The objection takes effect as soon as it is filed with the Official Receiver (ASFA) and entered on the NPII.
The grounds on which an objection can be lodged are detailed in section149D of the Bankruptcy Act.
Extension of bankruptcy to eight years
The grounds on which the period of bankruptcy can be extended to eight years include (Bankruptcy Act s 149A(2)(a)(i)):
- making an undervalued transaction or a transfer to defeat creditors (see ‘Property of a non-bankrupt spouse’, above);
- failing to provide details of property or income; or
- failing to disclose a liability that existed before the date of bankruptcy.
Extension of bankruptcy to five years
The grounds of objection on which the period of bankruptcy can be extended to five years include (Bankruptcy Act s 149A(2)(a)(ii)):
- failing to notify the trustee of a change of address;
- failing to disclose all debts and creditors; or
- failing to attend an interview.
A bankruptcy can be annulled if:
- the bankrupt pays all debts in full, including interest and fees owing to the trustee;
- the bankrupt makes an offer to pay their debts, which is accepted by creditors and approved by the court; or
- the court is satisfied that a sequestration order ought not to have been made or a debtor’s petition ought not to have been presented (Bankruptcy Act s 153B).
A discharged bankrupt is not released from, and continues to be liable to pay, the following debts:
- debts incurred after the commencement of the bankruptcy;
- debts incurred by fraud;
- maintenance arrears;
- non-provable debts such as unliquidated damages, HELP debts, etc.;
- income contributions due during the bankruptcy; and
- some criminal penalties, such as payments due under good behaviour bonds (Bankruptcy Act ss 153A–153B).
The bankrupt is otherwise released from any obligation to pay provable debts on discharge, although secured creditors maintain the right to seize and sell any secured property.