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To free an insolvent person from their financial obligations arising from debts incurred prior to that person becoming bankrupt. Bankruptcy is currently for three (3) years and the bankrupt is discharged from bankruptcy one day after their third anniversary year in bankruptcy.
The bankrupt is released from basically all categories of unsecured debts at the end of the bankruptcy.
There are certain (very few) debts from which the bankrupt is not released, and there are other debts from which the bankrupt is released but that, if not paid, will cause the loss of service or supply.
Creditors (except secured creditors – like those who hold a mortgage or physical security) are not permitted to take action to recover those debts and, instead, they have the right to lodge claims in the bankrupt estate and participate in a dividend.
The rights of these creditors to claim in the estate extends only to those debts that were owed up to the date of bankruptcy and does not extend to debts incurred after the date of bankruptcy.
The Bankruptcy Act 1966 (the Act) has various provisions on how debts are treated.
This means that debtors, bankrupts, creditors and trustees do not have the power or discretion to determine how debts will be treated.
The below outlines how certain debts are treated in bankruptcy, however, it can also be applied to debt agreements, personal insolvency agreements and Part XI administrations, as the provisions of the Act in relation to provable debts apply equally to these administrations.
Section 82 of the Act: all debts and liabilities, present or future, certain or contingent, to which a bankrupt was subject at the date of the bankruptcy, or to which they may become subject before their discharge by reason of an obligation incurred before the date of bankruptcy are provable in their bankruptcy.
Are debts for which security is not held over the bankrupt’s property
Are tied to a specific property, for example:
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to your circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
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