WHAT YOU NEED TO KNOW

Annulment is effectively the cancellation of a bankruptcy. There are three ways a bankruptcy may be annulled:

  • The bankrupt’s debts are paid in full, including interest, the realisations charge and your trustee’s expenses and fees. This may be a result of the trustee realising sufficient assets to clear all debts or funds to pay or debts may be provided by a third party such as relative. The Trustee will be in a position to provide details of the amount of funds needed to pay all debts.
  • The bankrupt offers and creditors accept a composition or arrangement, which is an offer of something less than payment in full. A composition may involve additional assets or monies being provided that would not usually be available in the bankruptcy. The major benefit of this offer is that a dividend will be paid to the bankrupt’s creditors that would otherwise not be available. The offer to creditors is made via the trustee and the bankrupt should discuss the other with the trustee prior to providing the final offer. A composition is made pursuant to section 73 of the Bankruptcy Act.
  • A bankrupt may apply to the court to set aside their bankruptcy if they believe that they should not have been made bankrupt or should not have lodged a debtors petition.

What happens after annulment?

The bankrupt’s name will appear on the public record (National Personal Insolvency Index) forever, with the record showing that the bankruptcy was annulled. Credit reporting organisations also keep records of bankruptcies for seven years. Other consequences of annulment are:

  • Surplus assets following the deduction of the trustee’s remuneration and expenses will be returned to the bankrupt.
  • Creditors to whom the bankrupt has granted security over assets (eg a mortgage) will still have their rights in relation to those assets, which may include the power to seize and sell them if the bankrupt defaults on repayments
  • A bankrupt is still liable for the payment of debts that are not provable in bankruptcy. See bankruptcy overview for more details.

For more information on corporate insolvency review the resources below or contact us today.

PERSONAL INSOLVENCY RESOURCES

PERSONAL INSOLVENCY OVERVIEW

From sudden employment and over-reliance on credit to relationship breakdowns and ill health, there are many reasons why people suffer financial hardship and experience unmanageable debt. If an individual cannot pay their debts they may and haven’t been able to reach an agreement with creditors, they may declare themselves bankrupt. Bankruptcy can either be voluntary or involuntary.

DECLARING BANKRUPTCY – WHAT’S INVOLVED?

Declaring bankruptcy voluntarily in Australia is a straight forward process and involves completing two separate forms and lodging them with the Australian Financial and Security Authority. This article outlines declaring bankruptcy in four step.

ASSETS, DEBTS AND INCOME IN BANKRUPTCY

Many people do not know what will happen to their income, debts and assets once they become bankrupt. To assist in advising those on the brink of personal insolvency, here is a broad overview of the bankrupt’s entitlement to hold on to certain assets and income during the period of bankruptcy.

BANKRUPTCY AND EMPLOYMENT

While bankruptcy doesn’t directly affect your employment, it may have consequences if you hold various licences or qualifications including building, property management, liquor and financial brokerage licences.

BANKRUPTCY AND HOUSES

If an individual is made bankrupt, it is not necessarily the case that their house will be sold from under them. Given that in most bankruptcy cases we are dealing with the family home, it pays to have knowledge in this field to provide the best outcome for your client and hopefully “save the house”.

BANKRUPTCY FAMILY TRUSTS

Family assets are commonly protected by the use of a structure named a discretionary trust (sometimes referred to as a ‘family trust’). This type of trust provides a firewall of protection for family trust assets.

DISCHARGE OR FINALISATION OF BANKRUPTCY

The discharge of bankruptcy means that the individual is no longer bankrupt.
The date of discharge of bankruptcy will vary depending on the type of bankruptcy.

PERSONAL INSOLVENCY LEGAL ACTION

There are many ways a creditor can seek to recover payment of a debt from an individual who cannot, or refuses to, pay that debt. This article covers the rights and obligations of individuals facing debt collection and exposed to legal action and enforcement.

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