Bankruptcy - Applying for annulment
The Federal Circuit Court ("the court") has power to annul a bankruptcy under section 153B of the Bankruptcy Act 1966 (Cth) ("the Act"). This factsheet will explain what the court will consider in deciding whether to annul a sequestration order and the process to apply. It does not explain what the court considers when deciding whether to annul a debtor’s petition.
A bankruptcy can also be annulled (without the need for an application to the court) on payment of a bankrupt’s debts (including interest and any other costs associated with the administration of their estate), under section 153A of the Act.
Even if your bankruptcy is annulled, your name will still appear on the National Personal Insolvency Index forever and also on your credit report for up to 5 years. There are other lasting consequences of having been bankrupt that will not be changed by an annulment. For more information about this you should see the Australian Financial Security Authority’s website or get legal advice about your personal situation.
There is no statutory time limit in which an application for annulment needs to be made, however, one of the things the court will consider when making its decision is whether the applicant has acted in a timely manner. As such, if you think you have grounds to apply to annul your bankruptcy, you should take steps as soon as you can.
If you make an annulment application and are not successful, you may be ordered to pay the legal costs of your trustee in bankruptcy and any creditors that participate in the proceedings. In some circumstances a cost order may be made against you even if you are successful. These costs are not always taken out of your bankrupt estate and may become a new debt that you need to pay, outside of the process of bankruptcy.
When the court will annul a bankruptcy
Section 153B of the Act says that the court may annul a sequestration order (the order which made the person bankrupt) if it is satisfied that the order should not have been made. This means that at your hearing there are two things that you need to convince the court about to be successful with an application for an annulment:
- That if the court was hearing the creditor’s petition on the day of this new hearing, the creditors petition would not have succeeded. This will involve you showing the court that you have grounds to oppose the petition (see QPILCH’s factsheet Bankruptcy - Opposing a creditors petition); and
- That in all the circumstances of your case, your bankruptcy should be annulled. It will be your responsibility to provide evidence of your financial position and any other relevant factors. There is a strong onus on you to be forthright with the court about your situation and provide the court with any relevant evidence, even if it is not favourable to your case.
The power of the court to annul a bankruptcy under section 153B of the Act is discretionary, which means that even if there was some problem with the way in which you were made bankrupt, the court can still decide that it is not appropriate to annul your bankruptcy. Courts only exercise their discretion to annul a bankruptcy in special circumstances. Some of the things the court may consider include:
- Whether you are solvent. If the evidence shows that you cannot pay your debts it is likely that the court will not release you from bankruptcy;
- Whether you have cooperated fully with your trustee in bankruptcy and complied with your obligations as a bankrupt under the Act;
- How much time has passed since the sequestration order was made. If this is a significant amount of time, the court may consider whether you have explained why you have not brought the application sooner; and
- Whether you attended the hearing of the original creditor’s petition, and if not, why not.
This is not an exhaustive list and the court will be bound to consider all the circumstances of an individual case when making a decision.
How to apply
To ask the court to annul your bankruptcy you will need to complete the following forms:
Application (Form 2)
When you are preparing the Form 2, you will be the Applicant and your trustee in bankruptcy will be the Respondent. You should not name any of your creditors as respondents. An example of how to identify your trustee properly is: "John Smith as trustee of the bankrupt estate of [your full name]."
Under Part A "Final Orders" section, you will need to set out the orders you would like the court to make after hearing your case. For example: The bankruptcy of Penny Pleasant be annulled under s 153B(1) of the Bankruptcy Act 1966 (Cth) on the grounds that the sequestration order made on 1 January 2015 ought not to have been made.
Under Part B "Interim Orders", you will need to set out any orders you want the court to make straight away. For example, you may need an order preventing your trustee in bankruptcy from taking any steps to sell your assets until after your annulment application has been decided. You should only ask for interim orders if they are necessary. If you don’t need any interim orders you should leave this section blank.
Notice of annulment application (Form 11)
You will need to complete this form to notify your creditors that you are applying for an annulment of your bankruptcy. You must give a copy of this Notice to every person/company to whom you owe money (not just the creditor who brought the original creditors petition).
An affidavit is a statement of your evidence. In your affidavit, you will need to set out all the facts that the court will need to consider to decide your application.
For more information about preparing an affidavit, see the QPILCH factsheet Drafting an Affidavit.
Filing your documents
All your forms will need to be filed (lodged) with the court. You can file your documents online or in person at the Federal Circuit Court Registry.
There will be a filing fee payable to lodge your application, though in certain circumstances you can apply for the fee to be waived. See QPILCH's factsheet Fee waiver guide - Federal Circuit Court for more information.
Serving your documents
You must personally serve:
- a stamped copy of all completed forms on your trustee in bankruptcy; and
- a stamped copy of the Notice of annulment application on each of your creditors,
at least 7 days before your hearing.
For an individual, personal service means that the document must be taken to the person, the person must be identified as the person named on the document, and the document handed to them. If the person refuses to take the document, the person serving it may put the document down in the presence of the person to be served and tell the person what the document is.
For a corporation, personal service requires you to go to the registered office of the corporation and to leave a copy of the documents with a person in the service of that corporation. The registered office of a corporation can be different from the company's principal place of business. You should obtain a current company extract from the Australian Securities and Investment Commission which will show the company's registered address.
If you are not comfortable serving your trustee in bankruptcy or creditors yourself, you can get a bailiff of the court or a process server to do it for you for a fee.
The information in this resource is for general information purposes only. If you would like help with a legal problem, you may be eligible for assistance from a LawRight service or clinic.
For more information about the help available, and the process for applying for help, please contact LawRight by:
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