Cancellation of Bankruptcy Options
You may be surprised to find out that bankruptcy is not permanent. In fact, you can actually have it cancelled or annulled, and life will be like it never happened.
The vast majority of bankruptcies last for three years and end with the bankrupt person being discharged. Being discharged releases the person from bankruptcy. Their right to travel overseas is reinstated and they no longer have to make income contributions to their trustee if they’re on a high income.
An annulment is a complete undoing of the bankruptcy. It is as if the bankruptcy never happened, apart from the fact that it will still appear on the public record (the NPII).
There are three ways that a bankruptcy can be annulled:
1. Pay off the debts in full
We call this the Lottery, Inheritance or Windfall Annulment. If you come in to enough money to pay all of the debts plus the costs, then the bankruptcy is annulled. If you can pay off your debts, then you are not insolvent, so there is no need for you to be bankrupt. Sometimes this may also happen when property seized in bankruptcy is sold and the money received is enough to cover the debt plus expenses.
2. A Proposal
While you are bankrupt, you can make a proposal to your creditors to end your bankruptcy. A ‘Section 73 Proposal’ lets you make an arrangement with your creditors as an alternative to bankruptcy. The main condition of the Section 73 is that it needs to be a better deal for creditors than they would get under bankruptcy. It’s your creditors that will decide whether or not to accept your proposal. If they agree, then the bankruptcy is annulled. However, you need to keep up your end of the bargain. A personal insolvency agreement is a way of doing this prior to and instead of filing for bankruptcy.
3. The Courts
You can apply to the Courts to have your bankruptcy cancelled. The only reason a court will cancel a bankruptcy is if the person should never have been bankrupt in the first place. There are many reasons why you shouldn’t have been made bankrupt (you had amnesia, you were in coma, creditors didn’t follow due process or did something illegal, etc.).