Case study: Duncan


Duncan is a 45 year old electrician from Melbourne. He is a single parent of two and earns a salary of $70,000 per year.

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

The trustee of his bankrupt estate was the Official Trustee (the Australian Financial Security Authority or AFSA).

Duncan’s grandmother recently passed away. He was surprised when her solicitor contacted him and told him his grandmother had left him $200,000 in her will. Duncan let AFSA know, as 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 your bankruptcy is by paying all debts (including interest on those debts, where interest is charged) plus the trustee’s fees, expenses, and the government ‘realisations charge’*.

As a first step, AFSA needed to contact Duncan’s creditors to confirm their debts. These debts plus the trustee fees, expenses and the realisations charge were paid. There was still enough money that remained for the next step. AFSA then asked the creditors if they were claiming interest on the money owed to them. After assessing these claims, the interest was also paid. As there was enough money to cover all relevant costs, Duncan’s bankruptcy was annulled.

The National Personal Insolvency Index (also known as the Bankruptcy Register) was updated to reflect the annulment, and Duncan was discharged from his bankruptcy. The entire process took about three months**.

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.

In Duncan’s matter, the amount paid to creditors, plus AFSA’s fees, expenses and the realisations charge totalled $150,000. *** This meant $50,000 was returned to Duncan after his annulment.

* A realisations charge is a levy on all realisations made in respect of administrations under the Bankruptcy Act 1966. Registered Trustees charge their fees differently to AFSA. Refer to AFSA’s website for more information.

** Timeframes for an annulment are an estimate. The Bankruptcy Act has statutory timeframes for creditors to lodge 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 lodge 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.

***Fees charges and expenses vary depending on what work the trustee needs to do in a bankrupt estate.