People generally know a lot about what restrictions and rights they have when they are in the thick of bankruptcy. But not many people know what happens to the bankrupt individual when bankruptcy ends. Before explaining the law, it must be noted that there are many things that could happen at the end of bankruptcy depending on your personal circumstances. Therefore, it is strongly advised that you consult with an insolvency lawyer to fully understand what you will face at the end of bankruptcy.
Essentially, these are the main results that may eventuate:
- Automatic discharge; or
Let’s look at them individually.
Three years after the date upon which you filed your Statement of Affairs, the law provides for automatic discharge. This means that you are automatically discharged from the provable debts owed to your creditors (in other words, your debts are written off). For instance, if you owed the RTA a speeding ticket fine of $550, you would be immediately released from this debt. However, there is a catch. Your appointed trustee retains the right to file an objection to your automatic discharge whereby he or she objects on the grounds that you have not fulfilled all your obligations as a bankrupt. The trustee’s objection must be in writing and must set out the grounds of the objection with accompanying evidence. Some examples of objections are that you hid assets, you did not attend meetings or you did not pay the required income contributions. The trustee also needs to give a copy of the notice to you and advise you that you can challenge his or her objection through the Inspector-General. If you believe that the trustee’s objection is unfair, you can apply to the Inspector-General to have the trustee’s objection reviewed.
If your automatic discharge is rejected, then, depending on the seriousness of your conduct, your bankruptcy period can extend to either 5 or 8 years. Less serious offences will warrant 5 years, for instance, if you failed to notify your trustee of a change of address, failed to disclose your debts or failed to attend meetings or interviews. Your bankruptcy period may extend to 8 years if your offence is serious, for example you failed to pay income contributions, you failed to provide full details of your income or you failed to disclose a liability that you had.
As you can see, whether you will be automatically discharged from bankruptcy depends on your conduct and whether you have satisfied your obligations in the proper administration of your estate. If you would like a further assessment of your bankruptcy status, LegalVision will be able to assess your situation and provide legal advice on a fixed-fee basis.
Besides automatic discharge, your bankruptcy can be annulled. In other words, your bankruptcy can be erased. This can be done either by the law, by the court or by resolution of your creditors. If the trustee is satisfied that all your debts have been paid in full, then bankruptcy is automatically annulled from the date of last payment. This cannot be done until all the proofs of debts from your creditors have been lodged.
Also, the court may find that your sequestration order should not have been made based on some procedural error. For instance, if the bankruptcy notice was not formally served upon you, you may be able to challenge it and get the bankruptcy annulled. Consequently, you will be restored to your pre-bankruptcy position. However, it must be understood that the trustee can make use of divisible property, which remains vested in the estate, to pay for costs, charges and expenses in administration. Any surplus property will be reverted back to you. But anyone who has an interest in that property can apply to the court for it to be transferred to them.
It is also important to note that the court may decide to set aside your bankruptcy. This means the legal effect of the bankruptcy will be dissolved. This power is at the court’s sole discretion and therefore you should consult with your lawyer as to whether you have a valid claim. The court will usually only set aside a bankruptcy if they believe that there was a procedural error or irregularity during the process.
After you are discharged
After you are discharged from bankruptcy, you will be released from any provable debts that you owe to creditors. However, debts that you will continue to pay include:
- Debts incurred after the commencement of bankruptcy;
- Debts incurred by fraud and non-provable debts such as unliquidated damages and student fees;
- Income contributions that were not paid as at the date of discharge. For example, if you were discharged on the 15 June, then you still owe half of June’s contribution at the end of the month; and
- Penalties and other debts.
You may think that at the end of bankruptcy, everything is reverted back to normal and you won’t have to repay the debts that you still owe. The unfortunate truth is your bankruptcy period may be extended to 5 or 8 years depending on your behaviour during bankruptcy. Plus you will still have to pay certain debts even after your bankruptcy ends. Each person’s bankruptcy will be legally assessed on a case-by-case basis. Know your rights and obligations. If you believe you have a valid claim for annulment or discharge of bankruptcy, LegalVision’s insolvency lawyers will gladly assist. Give us a call on 1300 544 755.