When a person is made bankrupt by way of a Sequestration Order, Section 54(1) of the Bankruptcy Act 1966 sets out that the person must, within 14 days from the day on which he or she is notified of the bankruptcy:
- make out and file with the Official Receiver, a statement of his or her affairs (“Statement of Affairs”); and
- furnish a copy of the statement to the trustee in bankruptcy.
It is important that the person files a Statement of Affairs as soon as possible, as the earliest date in which they can be discharged from bankruptcy is three years from when his or her completed Statement of Affairs has been filed with and accepted by the Official Receiver (ORPS3).
This means that instead of a bankruptcy being completed in the standard period of 3 years and one day, a person made bankrupt by way of a Sequestration Order, who fails to complete and file a Statement of Affairs with the Official Receiver could have, in theory, their bankruptcy extended indefinitely.
Any extension of bankruptcy beyond the standard 3 years and one day, means the bankrupt will continue to be subjected restrictions on their ability to:
- travel overseas;
- practice in certain occupations or to hold various licences; and
- obtain credit.
Furthermore, so long as a bankruptcy continues, the bankrupt will be prohibited from being the director (or involved in the management) of any company, without the permission of the Court.
However, the most significant deterrent for any person of having their bankruptcy extend beyond its standard term, should be the fact that their affairs and income remain the subject of monitoring for the duration of the bankruptcy by the trustee in bankruptcy, meaning that any income (exceeding a statutory threshold), lottery winnings or inherited monies may be property of the bankrupt estate and not that of the bankrupt themselves.
Put simply, a person made bankrupt by way of a Sequestration Order should endeavour to file their Statement of Affairs as soon as possible. It is in the interest of all parties.
Should you have any queries in relation to bankruptcies or other forms of personal insolvency, please contact our office for an obligation free discussion.
About the author
Benjamin Mitchell is a Senior Insolvency Accountant at Equinox (Formerly HLB Mann Judd Insolvency WA). Benjamin assists the Partners with the many Corporate and Personal insolvency appointments managed by the HLB Insolvency team.
If you have any queries about insolvency matters, please feel free to contact the team on 08 9215 7900.
