How do I annul my bankruptcy?

Annulment

Duncan became bankrupt in March 2021 after struggling to make ends meet for his family on a single income of $70,000 per year. He had credit card and personal loan debts totalling $100,000 and no assets that could be sold to pay his debts.

Duncan's grandmother passed away during his bankruptcy and left him $200,000 in her will. Duncan let the trustee of his bankrupt estate know, which was the Official Trustee (AFSA). He knew he needed to report any money or assets he received while he was bankrupt.

AFSA arranged to have the inheritance paid directly to Duncan's bankrupt estate. AFSA told Duncan there might be enough money to annul his bankruptcy, but a few steps needed to be taken first. One way of annulling bankruptcy is by paying all debts in full. This includes interest (where payable), realisations charge and the expenses of bankruptcy administration, including trustee fees and expenses.

Firstly, AFSA contacted Duncan's creditors to confirm their debts. These debts, plus the realisations charge and expenses of bankruptcy administration were paid. There was enough money remaining for AFSA to then ask the creditors if they were claiming interest on the money owed to them. After assessing these claims, the interest was also paid.*

Duncan's bankruptcy was annulled after all relevant costs were paid; in this matter $150,000. This meant $50,000* was returned to Duncan after his annulment.

The National Personal Insolvency Index (also known as the Bankruptcy Register) was updated to reflect the annulment, and Duncan was discharged from his bankruptcy.

*Note:

• Fees, charges and expenses vary depending on what work the trustee needs to do in a bankrupt estate. Registered Trustees charge their fees differently to AFSA.
• Most creditors who are owed money in a bankruptcy can claim interest on the amount outstanding. Trustees verify the claims of creditors (including the amount of debt and the basis and amount of any interest claimed) to make sure they are correct. Interest can only be claimed up to the date the creditors receive payment in full.
• The Bankruptcy Act has statutory timeframes for creditors to submit a 'proof of debt' to make a claim in the estate for their debts and interest claims. Timeframes also apply to payments to creditors (called 'dividends') in a bankrupt estate. Timeframes may be longer if creditors do not submit their claims or respond in a timely manner, if more information is required by the trustee to assess those claims, or a proof of debt is rejected by the trustee.

Composition

In 2019, Lucy's shifts at a café decreased and she had to rely on credit cards to cover her expenses. By mid-2020, she owed $30,000 to banks and became bankrupt in August 2020. The trustee of her bankrupt estate was the Official Trustee (AFSA).

In September 2021, Lucy wanted to set up a company to start her own café but she could not be a director of a company while bankrupt, unless she had court permission. Lucy's parents offered to provide money to help so she called AFSA to find out more and was told she could make a composition proposal. This is an offer to creditors to finalise debts by repaying a percentage (less than payment in full). It must also allow for payment of the expenses of the bankruptcy administration, including trustee's fees and expenses.

Lucy told AFSA that she wanted to make an offer. Her parents transferred $20,000 to AFSA to hold in trust until creditors voted on the composition proposal. They also paid for the creditors meeting costs.*

AFSA wrote a report to creditors outlining what Lucy was offering, and their investigations into the bankrupt estate. AFSA had not found anything of concern, or any assets owned by Lucy that might provide a better return to creditors, so it was recommended that creditors should accept the proposal. The creditor meeting was scheduled a month after the report was provided to creditors.*

At the meeting, the composition was accepted by creditors.

• Acceptance of an offer requires a majority of the creditors voting at the meeting to vote in favour (yes) and at least 75% in value of the voting creditors to vote in favour.

Lucy's bankruptcy was annulled (cancelled) on the date of the meeting. The National Personal Insolvency Index (also known as the Bankruptcy Register) was updated to reflect the annulment.

*Note:

• Refer to fees and charges, including the current fee for advertising a meeting of creditors.
• Timeframes for when a meeting of creditors can be held can differ. The Bankruptcy Act has statutory timeframes for creditors to submit a proof of debt to make a claim in the estate for their debts and interest claims. Timeframes also apply to payments to creditors (called 'dividends') in a bankrupt estate. Timeframes may be longer if creditors do not submit their claims or respond in a timely manner, if more information is required by the trustee to assess those claims, or a proof of debt is rejected by the trustee.