How long does a bankruptcy last?

Here's an explanation of how long a bankruptcy lasts, according to the provided legislation:

In Plain English

Generally, a bankruptcy in Australia lasts for 3 years from the date you file your statement of affairs (if it's a sequestration order) or from when the Official Receiver accepts your debtor's petition. However, this isn't always the case:

  • Objections: If someone objects to your discharge, it can extend the bankruptcy to 5 or even 8 years, depending on the reasons for the objection.
  • Before the 2023 Amendments: If you became bankrupt before the Bankruptcy Amendment (Discharge from Bankruptcy) Act 2023 came into effect, the old rules might still apply to your case.

Detailed Explanation

The duration of bankruptcy in Australia is primarily governed by section 149 of the Bankruptcy Act 1966.

  • Automatic Discharge: Under subsection 149(1) of the Bankruptcy Act 1966, a bankrupt is automatically discharged after 3 years from a specific date, depending on the type of bankruptcy:

    • Sequestration Order: The date the statement of the bankrupt's affairs was accepted under subsection 57B(1) was filed.
    • Debtor's Petition: The date the Official Receiver accepted the debtor's petition.
    • Debtor's Petition Against a Partnership: For a partner who didn't join the petition, the date the statement of affairs was accepted under subsection 57B(1) was filed.

  • Objection to Discharge: Section 149A of the Bankruptcy Act 1966 outlines how an objection can extend the bankruptcy period. If an objection takes effect, the discharge is delayed until the end of a "prescribed number of years" from a "prescribed date."

    • The "prescribed number of years" is either 5 or 8 years, depending on the grounds for the objection (subsection 149A(2)(a)). Certain grounds, listed in paragraph 149D(1), trigger the 8-year extension.
    • The "prescribed date" is usually the same date used to calculate the initial 3-year period (filing of statement of affairs or acceptance of debtor's petition), unless the objection was based on the bankrupt being absent from Australia, in which case it's the date they returned (subsection 149A(2)(b)).
    • If an objection is withdrawn or cancelled, it's as if it never happened, and the bankrupt can be discharged under section 149 if the initial 3-year period has passed and no other objections are in effect (subsection 149A(3)).

  • Transitional Provisions: The Bankruptcy Amendment (Discharge from Bankruptcy) Act 2023 includes transitional provisions in Part 2 of Schedule 1. These provisions address bankruptcies that commenced before the Act's commencement. Item 30 states that sections 149 and 149A of the Bankruptcy Act 1966, as they existed before the amendments, continue to apply to bankrupts whose statement of affairs was accepted before the commencement of the amending act, and who had not been discharged before commencement. Item 31 alters the discharge date for bankrupts discharged before commencement of the Bankruptcy Amendment (Discharge from Bankruptcy) Act 2023.