If you are considering filing for bankruptcy, or have already declared bankruptcy, you have probably come across the term bankruptcy discharge.
While you may have some idea of what it means, what exactly is a bankruptcy discharge, and what does it mean for you?
Find out what it is, when it happens and how to discover your bankruptcy discharge date.
What is bankruptcy discharge?
Bankruptcy discharge signals the end of your bankruptcy and the start of your financial “fresh start”. This means that you are released from personal liability for the debts owed to the creditors included in your bankruptcy.
How is bankruptcy discharged?
Discharge from bankruptcy usually occurs automatically after the completion of the bankruptcy term. After discharge, the individual is no longer subject to many of the provisions of the Bankruptcy Act, but does still have some ongoing obligations to assist the trustee.
Automatic discharge only occurs when you have abided by your obligations under the Bankruptcy Act, and your trustee hasn’t filed any objections to discharge.
When does a bankruptcy discharge?
If an individual is voluntarily bankrupted (that is, via a Debtor’s Petition), the discharge date will be three years and one day following lodgement and acceptance of the statement of affairs.
In an involuntary bankruptcy (called a Creditor’s Petition), the statement of affairs is not lodged to start the bankruptcy. Once appointed, the trustee will send the individual a statement of affairs to complete and return.
The trustee will then lodge the completed statement of affairs, and the bankruptcy discharge date will then be three years and one date following acceptance of the statement of affairs. So, the sooner the individual returns the statement of affairs, the sooner the three year period will commence.
What are objections to discharge?
The period of bankruptcy may be extended to five or eight years if a trustee lodges an objection to a bankrupt’s discharge. This can occur when bankrupt individual doesn’t comply with their obligations under the Bankruptcy Act. The length of the extension will depend on the nature of the breach.
Some common breaches made by bankrupt individuals include:
- Failure to provide information to the trustee
- Failure to disclose details of actual or expected income to the trustee
- Failure to explain to the trustee how money was spent
- Failure to disclose all assets and creditors to the trustee
- Leaving the country and not returning when requested
Alternatives to bankruptcy discharge
Your bankruptcy may be annulled (erased) rather than discharged. This can be done either by the law, by the court or by resolution of your creditors. If the appointed trustee is satisfied that all of your debts have been paid in full, your bankruptcy is annulled from the date of last payment. This is only performed when all the proofs of debts from your creditors have been lodged.
Finding out your bankruptcy discharge date
You can send a request to the Australian Financial Security Authority (AFSA) by completing the “end of bankruptcy enquiry” form on their website.