Cancellation or annulment of bankruptcy

There are three main ways a bankruptcy can be annulled:

• The bankrupt’s debts are paid in full, including interest, the realisations charge and the 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 give details of the 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 money being provided that wouldn’t usually be available in the bankruptcy. The major benefit of this is that a dividend is paid to the bankrupt’s creditors, which would otherwise not be available. The offer to creditors is made via the trustee, and the bankrupt should discuss it with the trustee before providing the final offer. A composition is made under s 73 of the Bankruptcy Act.
• A bankrupt may apply to the court to set aside their bankruptcy if they believe they shouldn’t have been made bankrupt or lodged a debtor’s petition.

What happens after an 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 include:

• Surplus assets following the deduction of the trustee’s remuneration and expenses will be returned to the bankrupt
• Creditors to who the bankrupt has granted security over assets (e.g., a mortgage) will still have their rights in relation to those assets. This 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