Annulment: Can my bankruptcy be cancelled?

Annulment: Can my bankruptcy be cancelled? The provider of this information is Insolvency & Trustee Services Ausralia.

ANNULMENT CAN MY BANKRUPTCY BE CANCELLED? Reproduced by express permission form the Commonwealth Government, Insolvency and Trustee Services Australia. December 2004 Edition What is an annulment? Annulment is the cancellation of bankruptcy before the end of the normal 3 year period. Bankruptcies are usually annulled: if the creditors’ debts and trustee’s expenses and fees have been paid in full, or if creditors have accepted an offer of something less than payment in full (a composition or arrangement), or by application to the Court, in some limited circumstances. Effects of an annulment your annulment is recorded on the National Personal Insolvency Index (NPII) database and is available to the public. Your name will appear on the NPII forever. More information is available in the pamphlet: Searching the Public Record you will need to contact commercial credit reference agencies to record the annulment. assets not needed by your trustee to pay your creditors or expenses and fees may be returned to you. More information is available in the pamphlet: Assets: What happens to my assets if I go bankrupt? Annulment does not release you from: maintenance orders debts incurred by fraud prosecution for bankruptcy offences. Annulment by payment in full your bankruptcy may be annulled if: your creditors, and any interest payable on debts to creditors, and realisations charge, and your trustee’s expenses and fees have all been paid in full The money required for payment in full usually comes from the sale of assets by your trustee or from a source not otherwise available to the trustee, such as money provided by a relative. Your trustee will be able to advise you of the approximate sum required for payment in full. The exact sum will not be known however until all creditor’s claims, including interest, are resolved and your trustee’s fees and expensed are paid. Your bankruptcy will be annulled on the date the final payment is made from your bankruptcy. An asset is anything a person owns before going bankrupt, or buys or receives during bankruptcy A bankruptcy offence occurs when the bankrupt does not carry out an obligation under the Bankruptcy Act. They may be prosecuted and fined or imprisoned Realisations charge is a Commonwealth Government levy on all bankruptcies, compositions or arrangements. It is taken out before expenses, fees and dividends Your trustee is the person who administers your bankruptcy or Personal Insolvency Agreement; wither a registered trustee or ITSA See the Prescribed information booklet for definitions of other bankruptcy terms Annulment by a composition or arrangement during bankruptcy Compositions and arrangements are offers made by bankrupts through their trustees to finalise their debts. The creditors vote on whether to accept such offers. An offer: may involve assets already in the bankruptcy and needs to include other money or assets that would not normally be available to creditors, such as money provided by a relative. These offers benefit creditors as they receive a dividend that would not otherwise be available. All creditors will receive an equal rate of dividend unless your offer provides otherwise. Your written and signed offer must: set out the terms be lodged with the trustee provide for payment of the trustee’s fees and expenses. Before finalising your offer and asking your trustee to call a creditor’s meeting to formally consider the offer, you should: discuss with your trustee if there are any legislative requirements that may affect your offer discuss any proposed offer with major creditors to find out if it is acceptable. Your trustee may: refuse to call a meeting if the proposal does not provide for payment of trustee’s fees that have been approved by creditors but are unable to be taken out of the estate require a deposit to cover the expenses and fees of the meeting. Any money component of the offer will be held in trust until your offer is accepted by creditors. Creditor’s meeting Your trustee may call a meeting of creditors to consider and vote on your offer. The trustee will advertise this meeting and certain debtor information in a national and a regional newspaper Each creditor will be sent: a notice and agenda of the meeting a copy of your offer your trustee’s report Your trustee will be able to give you more information on how meetings are conducted. You must attend the meeting if requested by your trustee. As an alternative to holding a meeting the trustee may invite creditors to vote on the offer in writing if: the offer is straightforward and not expected to be varied or subject to further negotiation, and no creditor objects Trustee’s report The report to creditors must state whether they will benefit if the offer is accepted and tell them: who is providing the funds the expected dividend the trustee’s fees and expenses details of assets, realisations and dividends details of your conduct and financial dealings. A dividend is an amount paid to a creditor by a trustee to settle a debt. It is usually less than the amount originally owed to the creditor Creditor’s acceptance For your proposal to be accepted your trustee must receive ‘yes’ votes from: a majority in number of the creditors who vote and at least 75% in $ value of the creditors who vote. If your offer is accepted Your bankruptcy will be annulled immediately on acceptance of the offer by your creditors. Your trustee’s fees, the government realizations charge and the creditors will be paid according to the terms of your composition or arrangement. Details of your annulment are recorded on the NPII and are available to the public. All creditors with debts that can be claimed in your bankruptcy are then bound by the terms of the offer. More information is available in the pamphlet: Debts and Creditors If your offer is rejected If your offer is rejected your bankruptcy will continue. Your trustee will: keep funds covering the expenses and fees of calling the meeting from any deposit refund any money provided for the offer. Enforcement of the composition or arrangement The provisions of the offer may be enforced by the Federal Court or the Federal Magistrates Court on an application by an interested person. Disobedience of an order of the Court is contempt and is punishable accordingly. How is a composition or arrangement varied? Creditors, with your written consent, can vary the terms by passing a special resolution. If you wish to vary the terms you can make a written request to your trustee. The trustee sends notice to the creditors and, if there is no objection in writing, he or she can vary the terms. If a creditor objects, a creditors’ meeting can be called to consider the proposed amendment. For the proposed variation to be accepted, it must be passed by a special resolution of creditors. Special resolution – A majority in number of the creditors who vote and at least 75% in $value of the creditors who vote Setting aside a composition or arrangement Only the Court can set aside a composition or arrangement where: it is unreasonable it does not comply with the Bankruptcy Act or Regulations false or misleading information has been provided there is any other reason that the Court sees fit. In these cases the composition or arrangement is set aside on the basis that it should not have been accepted initially. The Court may also make you bankrupt. Court – The Federal Court or the Federal Magistrates Court Termination of a composition or arrangement The Court can terminate a composition or arrangement on application from you, a creditor or the trustee where: there is a likely injustice or delay to creditors you fail to carry out its terms and termination would be in the interests of creditors there is any other reason that the Court sees fit and termination would be in the interests of creditors. The Court may also make you bankrupt. If the trustee is satisfied that you are in default, a composition or arrangement can be terminated: without holding a creditors’ meeting if all creditors do not object to the trustee’s notice of the proposed termination by creditors, by ordinary resolution at a special meeting called to consider the termination. A composition or arrangement can also be terminated by an event specified in the agreement as causing termination Ordinary resolution – A majority in number of the creditors who vote Application to the Court If you think that you should not have been made bankrupt or should not have lodged your Debtor’s Petition, you may apply to the Court to have your bankruptcy annulled. These applications are rare and you should seek legal advice before making such an application. Where to contact us Telephone 1300 364 785 ITSA website wwwitsa.gov.au ITSA Offices ACT Level 2, NFF House, 14-16 Brisbane Avenue BARTON ACT 2600 Tel: 1300 364 785 Fax: (02) 6270 3608 email: itsa.canberra@itsa.gov.au New South Wales GPO Box 548 SYDNEY NSW 2001 Level 8, 135 King Street SYDNEY NSW 2000 Tel: 1300 364 785 Fax: (02) 8233 7891 email: itsa.sydney@itsa.gov.au Queensland Brisbane PO Box 10443 Adelaide Street BRISBANE QLD 4001 Level 16, 340 Adelaide Street BRISBANE OLD 4000 Tel: 1300 364 785 Fax: (07) 3360 5466 email: itsa.brisbane@itsa.gov.au Townsville PO Box 1527 TOWNSVILLE QLD 4810 Level 1, National Australia Bank Building 315 Ross River Road AITKENVALE OLD 4814 Tel: 1300 364 785 Fax: (07) 4727 0500 email: itsa.townsviIIe-0itsa.gov.au South Australia/Northern Territory GPO Box 2604 ADELAIDE SA 5001 Level 18, Grenfell Centre 25 Grenfell Street ADELAIDE SA 5000 Tel: 1300 364 785 Fax: (08) 8112 4305 email: itsa.adelaide@itsa.gov.au Tasmania GPO Box 850 HOBART TAS 7001 Level 4, ANZ Centre 22-26 Elizabeth Street HOBART TAS 7000 Tel: 1300 364 785 Fax: (03) 6221 7700 email: itsa.hobart@itsa.gov.au Victoria Level 10, Melbourne Central 360 Elizabeth Street MELBOURNE VIC 3000 Tel: 1300 364 785 Fax: (03) 9272 4900 email: itsa.melbourne@itsa.gov.au Western Australia GPO Box H536 PERTH WA 6841 Level 12, Durack Centre 263 Adelaide Terrace PERTH WA 6000 Tel: 1300 364 785 Fax: (08) 9268 1298 email: itsa.perth@itsa.gov.au More information pamphlets are available. See the website or contact ITSA for a complete list.