19 February 2019
Are you seeking to have your bankruptcy removed and clear your name? The annulment of bankruptcy is the term used to cancel your bankruptcy and this article sets out the number of ways as to how this can be done.
In most circumstances, the period of bankruptcy lasts three (3) years and one day from the date the bankrupt submits his or her statement of affairs to their trustee. However, even if a bankrupt is discharged, the bankruptcy is recorded on the National Personal Insolvency Index (NPII) permanently on the bankrupt’s name and record. The annulment of bankruptcy removes this record , and can occur during the bankruptcy period or after being discharged.
There are three ways that a bankruptcy can be annulled:
A section 73 proposal is a proposal made by a bankrupt to his or her creditors for a payment or composition made by the bankrupt in satisfaction of his or her debts or a scheme of arrangement of his or her affairs.
A section 73 proposal or scheme of arrangement is lodged with the trustee of the bankrupt estate for the trustee’s consideration and the trustee will present the proposal to creditors. The creditors will generally review the proposal and will be able to vote to accept or refuse the proposal. Pursuant to section 74 of the Act, if the creditors accept the proposal, the proposal shall be passed as a creditors meeting held in accordance with the Insolvency Practice Rules, by way of a special resolution by the majority of creditors (being at least three- quarters of the creditors based on value of debt) and the proposal is enforceable by the court. If the proposal is accepted by creditors, it is generally intended to be a win -win proposition for all parties involved, as creditors are entitled to a payment, and the bankrupt is entitled to his or her annulment. However, if the terms of the proposal are not abided by the bankrupt, such act will be seen as contempt of the court. Therefore, if the bankrupt puts forward a section 73 proposal, it is crucial that the proposal is realistic and that the terms are adhered to, otherwise there is a risk that the proposal may be terminated, varied or set aside by the creditors or trustee. 
Under section 153A of the Act, a bankrupt can seek consent from the Trustee to annul his or her bankruptcy provided that the Trustee is satisfied that the bankrupt has paid all of the bankrupt’s debts owed by creditors, the Trustee’s remuneration and any interest relevant to the debts that are interest bearing debts.
The meaning of the “bankrupt’s debts” has been construed to include all debts owed to any creditor of the bankrupt and all interest associated with an interest-bearing debt. An interest-bearing debt is a debt that has accrued generally pursuant to a contract or credit application between the bankrupt and the creditor whereby that contract contains a provision for the creditor to charge that interest ongoing until the original debt has been paid in full.
If you are seeking to annul your bankruptcy pursuant to section 153A of the Act, the first step would be to ascertain the amount of the debt owed to creditors and then ascertain whether any of those debts are “interest bearing debts”. Making contact with your Trustee to ascertain information as to the debt amount and any interest amount, as well as the trustee’s fees incurred to date is crucial to determine whether you have an ability to annul your bankruptcy under section 153A of the Act. However, we recommend obtaining legal advice prior to liaising with your trustee in relation to the total debt owed by creditors and whether any of those debts may be considered interest bearing debts. This will allow a Bankrupt to plan the potential pay out involved when annulling his or her bankruptcy, along with any legalities involved.
The final option a bankrupt has to seek an annulment of bankruptcy is pursuant to a court order under section 153B of the Act. Section 153B of the Act can only be utilised in limited circumstances. Section 153B of the Act provides that:
Under section 153B of the Act, the bankrupt should be able to demonstrate the following considerations in order for the court to exercise its discretion:
While there are a number of ways in which a bankrupt can seek an annulment of bankruptcy, a bankrupt should always obtain legal advice prior to making any application for annulment. JHK Legal has extensive experience in acting for bankrupts and liaising with Trustees of bankrupt estates in order to obtain exceptional outcomes for clients. Should you have a bankruptcy query, please do not hesitate to contact us.
Lawyer, Hayley Tibbie
 Section 153A of the Bankruptcy Act 1966
 Section 153B(1) of the Bankruptcy Act 1966
 Section 153B(2) of the Bankruptcy Act 1966