There could be instances that for various reasons like loss in business or loss of earning, you will not be able to repay the debts. In such cases, you can approach the appropriate court and initiate bankruptcy proceedings. For example, in Australia, the bankruptcy proceedings are governed by the Bankruptcy Act 1966 (Commonwealth). In such cases, after examining the case the court will declare you bankrupt, which can be for a maximum period of three years. However, either before or after the three-year period, you will be entitled to apply to Australian Financial Security Authority (AFSA) for bankruptcy annulment.
Return of assets:
Annulment is the cancellation of the declaration of bankruptcy. You can make an application for bankruptcy annulment once you have paid the creditors, and the creditors have fully discharged you from the liability. Once bankruptcy is annulled the trustees will return those assets that are not required to pay the creditors.
National Personal Insolvency Index:
Once the annulment order is passed you will have to approach the commercial credit reference authority to record the annulment. The agency will record the annulment in the National Personal Insolvency Index (NPII). This will be a permanent entry on the NPII, and it will be available in the public domain.
Issues not affected by annulment:
But, bankruptcy annulment does not discharge you from debts if any incurred by fraudulent methods and other maintenance orders. Further, you will also be not discharged from any of the prosecution under bankruptcy offences.
Extension of bankruptcy:
Further, the court after the expiry of the three years may cancel bankruptcy provided the creditors have not filed any objection to discharge you from bankruptcy. If the creditor files an objection, then the court may extend the bankruptcy which may vary from five to eight years.
Composition of debt:
The trustees allow you to make offers to the creditors and thereby discharge you from the debt. Such offers may be met either out of the assets already in possession of the trustee, or it may be out of the money provided by other persons like your close friends or relatives. If the creditors agree for the composition of debt then they must file their concurrence with the trustee. If the trustee is satisfied with such composition of debt, then the court would order bankruptcy cancellation. However, if the court finds the composition of debt is detrimental to the interests of the creditors, then such composition or debt arrangement can be rejected. Similarly, if the trustee finds you have defaulted on the composition, then the court may again declare you a bankrupt. Check Debt Mediators for more details.
Sale of property deemed made validly:
Further, according to law, any sale of property or payments made by the trustee on your behalf before such annulment of bankruptcy are deemed to have been made validly. Further, the law says that after payment of creditors, the trustee is bound to return to you the remainder of the property after recovering the cost and charges if any.
Attorney to represent:
Considering the complexities of bankruptcy law and the considerable paperwork involved, you may also authorize any of the bankruptcy attorneys to represent you in the case. In such cases, you will have to enter into an agreement with the attorney.