When a person becomes a bankrupt, ordinarily they will be discharged at the end of the period that is 3 years from the date that they filed their statement of affairs with the Australian Financial Security Authority (‘AFSA’). In some situations, this period can be extended for a further period if the bankrupt has failed to discharge their duties under the Bankruptcy Act 1966 (‘Act’), or for other grounds stated in the Act.
Even if the period is not extended, the obligations imposed on a bankrupt during the course of a bankruptcy are onerous, time-consuming, and understandably, can be stressful. However, there are ways that a bankruptcy can be ended early. These include the following:
- the bankruptcy can be annulled by payment of all of the bankrupts debts in full, including interest, realisations charges payable to AFSA and the payment of the appointed bankruptcy trustee’s fees and expenses;
- the bankrupt may apply to the Court to prove that they should not have become a bankrupt in the first place (which in practice, can be a difficult and costly avenue to pursue).
- the creditors of the bankrupt estate can accept an arrangement called a ‘composition’ (‘Section 73 Proposal’) if the amount proposed to be paid to those creditors is less than payment of all the bankrupt’s debts in full;
This article deals with Section 73 proposal.
What is Required for a Section 73 Proposal
A Section 73 Proposal is a proposal to the bankrupt’s creditors under that section of the Act.
There are certain things the Section 73 proposal must contain, in that it must:
- adequately provide for payment of the trustee’s fees and other costs of handling the bankrupt’s bankruptcy;
- state what the bankrupt’s creditors will receive by way of a distribution / payment, and when; and
- identify where the money is coming from.
The bankrupt must not make the proposal unless they can carry it out.
The proposal is considered at a formal meeting of the bankrupt’s creditors and it will be up to the bankrupt’s appointed trustee to call that meeting. The trustee will prepare a report to the creditors of the bankrupt estate in advance of that meeting which will tell them:
- what they will be paid if the bankrupt remains bankrupt (this will involve a detailed analysis of the bankrupt’s assets, including what might be realised through the course of the bankruptcy, and the bankrupt’s liabilities); and
- whether the creditors will be better off accepting the bankrupt’s proposal, as opposed to allowing the bankruptcy to continue.
However, the trustee has no voting rights for the purposes of the proposal; it will be the bankrupt’s creditors that determine whether to accept or reject the proposal.
If the bankrupt’s creditors accept the bankrupt’s proposal, and the terms are effectuated the bankruptcy comes to an end.
How we can help
Here at Rose Litigation Lawyers, we have extensive experience in providing advice and assistance to bankrupts seeking to end their bankruptcy early. If you need further advice and assistance in respect to your bankruptcy, call Rose Litigation Lawyers on (07) 3211 2922 or (07) 5574 0011 for an obligation free consultation on what you may be able to do.