How does bankruptcy end ?

Bankruptcy lasts three years and your discharge is automatic. At the end of that time, you will receive a Certificate of Discharge to confirm you are no longer bankrupt.

The trustee can object to your discharge and extend the period if you do the wrong thing, but this is rare and won’t happen if you follow the rules. If we are administering your bankrupt estate, we ask you to work with us because we are working to help you.

If your debts are paid in full during that three-year period, your bankruptcy is ‘annulled’. For that to happen, interest must also be paid to creditors who are legally able to claim interest, for the period from when bankruptcy starts to the date the dividend is paid.

It is also possible to propose a composition at any time during the three years. A composition is an offer to your creditors to repay a percentage of your debts.

The trustee will convene a meeting of creditors and if they approve your proposal, bankruptcy is annulled and you are subject to the composition. However, there are some traps to be aware of.

A composition costs more than bankruptcy because creditors are required to get a better result. It may also extend the time frame for resolving your financial problems beyond the three years of bankruptcy.

During the composition, if you become sick or lose your job, the required payments under the composition still must be paid and that could put you under extreme financial pressure.

Also, if you don’t comply with the composition and it is terminated, you may have to start the bankruptcy process again, which means you have wasted time dealing with the first bankruptcy and the composition.

If you want to go down the track of proposing a composition, go carefully.

Alan Nicholls’ no obligation help desk

Nicholls & Co provide a free, no obligation ‘help desk’ for people considering bankruptcy – we discuss and explain bankruptcy and answer questions for anyone who is considering bankruptcy. The Nicholls & Co help desk can be accessed by phone (1300 060 122) or helpdesk@nichollsco.com.au . Alan Nicholls, Registered Trustee in Bankruptcy is also available to answer your questions to enable you to decide if bankruptcy is right for you.