In Australia, the duration of bankruptcy typically lasts for 3 years and 1 day, as per the Bankruptcy Act 1966. This applies to both voluntary bankruptcy (when you voluntarily file for bankruptcy) and involuntary bankruptcy (when a creditor applies to the court to make you bankrupt). The bankruptcy period begins one day after filing your petition with the Australian Financial Security Authority (AFSA) for voluntary bankruptcy or one day after your statement of affairs is accepted by AFSA for court-ordered bankruptcy.
However, it’s important to note that bankruptcy can be extended beyond the standard 3-year period under certain circumstances. The decision to extend bankruptcy is made by the bankruptcy trustee, and the period may be extended if the bankrupt individual fails to fulfill their obligations or provide necessary information. The bankruptcy period can be extended to 5 or even 8 years in some cases.
Some common reasons for extending bankruptcy include:
- Failure to provide information requested by the trustee.
- Failure to disclose all income and sources.
- Failure to make compulsory payments.
- Failure to disclose all assets and debts.
It’s also important to be aware that while the formal bankruptcy period may end after 3 years and 1 day (or an extended period), the effects of bankruptcy can linger for a longer time:
- Your details will appear on the National Personal Insolvency Index (NPII) permanently. The NPII maintains records of your bankruptcy proceedings and is publicly available for searching.
- Credit reporting agencies can keep a record of bankruptcies for up to 5 years from the date you became bankrupt or 2 years from when your bankruptcy ended, whichever is later. This can affect your ability to obtain credit in the future, such as loans, credit cards, or mortgages.
Therefore, while the formal bankruptcy period has a defined duration, the financial and personal implications of bankruptcy can extend beyond that timeframe. It’s important to seek professional advice and carefully consider the consequences before entering into bankruptcy in Australia.