Annulment of bankruptcy

Annulment of bankruptcy – pursuant to the Bankruptcy Act 1966 (Cth) a person’s bankruptcy can be annulled, meaning that the bankruptcy would be treated as though it had never occurred (however a bankrupt’s name will still appear on the National Personal Insolvency Index). There are three main ways that a bankruptcy can be annulled:

  1. By proposal;
  2. By payment of debts; and
  3. By Court order.


Pursuant to section 74(1) of the Bankruptcy Act 1966 (Cth), if a proposal made by a creditor under section 73 for a composition of the satisfaction of debts (i.e. an alternate arrangement). This type of proposal must only be put to and accepted by a bankrupt’s creditors and usually will only be accepted if the composition would put the creditors in a better position vis-à-vis a person being bankrupt.

Payment of debts

Pursuant to section 153A of the Bankruptcy Act 1966 (Cth) a person’s bankruptcy can be annulled if the trustee is satisfied that all of the bankrupt’s debts have been paid in full (if the debt includes interest the interest must be paid up until the date that the debt is satisfied).

Court order

Pursuant to section 153B of the Bankruptcy Act 1966 (Cth), if the Court is satisfied that the sequestration order made to bankrupt a person ought not to have been, or a debtor’s petition for a sequestration order ought not to have been presented or accepted, a Court can make an order for the annulment of bankruptcy.

If bankruptcy is annulled any surplus assets that are left after the payment of the trustee’s remuneration will be given back to the bankrupt. However, all creditors who have security interests over these assets will retain their rights in relation to those assets and the bankrupt will still be liable for all the debts payable that were not provable in bankruptcy.