Case study: 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.