The end of your bankruptcy typically marks a new chapter in your life, where you can shake off any residual shackles you may have felt and begin anew. We are asked a lot of questions about the process of bankruptcy, how you are affected during bankruptcy and, commonly, what happens after bankruptcy. While you certainly retrieve some financial freedom and autonomy, there are things to know and consider as you near the end, or end, your bankruptcy period.
You can apply for credit
After your bankruptcy period expires you are legally allowed to apply for credit and loans. However, it is up to your provider to decide if you are eligible and may have to indicate a past bankruptcy which they may or may not factor into their decision. Your credit report will also flag a bankruptcy after the period has finished; two years from bankruptcy end-date, or five years from the bankruptcy start date, depending on which date is later.
Credit approval often requires a credit rating. Your previous bankruptcy will have had a negative impact on your credit rating and may cause issues in apply for credit. This doesn’t mean that you cannot rebuild your credit rating. Opting for smaller credit applications, and adhering to the repayments, may assist in building up your credit rating.
We also strongly recommend you thoroughly consider the credit you’re applying for, and if your reasons are similar to those that put you on the path to bankruptcy in the first place. Credit can be good, but it’s worth noting if you’re trying to live beyond your means, or applying for credit with repayments at the very top of your budget with little wriggle room. Use your bankruptcy experience to make smart credit choices for your future.
You may still be in contact with your trustee
Through your bankruptcy you will have been answerable to your appointed trustee as they are the conduit between you and your debtors and the manager of your debts. While you will typically not have to remain in contact with them after your bankruptcy period, there are instances where their role continues beyond it (especially if a claimed asset has not yet been sold). They may also require you to provide further financial information or make outstanding payments.
Your behaviour through bankruptcy matters upon its completion
After three years of filing your Bankruptcy Form (Formerly know as Statement of Affairs), you are legally afforded automatic discharge from your bankruptcy period. However, while it is automatic, it does not mean it is absolute. Your trustee has the authority to file an objection to your discharge if they feel you did not fulfil your bankruptcy obligations. This can be on the grounds that you were:
Keeping hidden assets
Falsifying documents or information pertaining to your financial situation
Reneging on required payments.
These behaviours through your bankruptcy can have serious consequences to you finalising your bankruptcy period in an expected timeframe, and can even extend it by up to eight years.
If you disagree with the objections, you are able to apply for a review of the objection to the Inspector-General.
The trustee’s objection will need to include evidence of their claims.
You need to confirm the end of your bankruptcy
You may need to request a discharge letter from the Australian Financial Security Authority (AFSA) to confirm the bankruptcy’s completion, or from your bankruptcy trustee. You may need to contact your trustee to request an expected end-date be provided to you so that you can successfully complete your End of Bankruptcy Enquiry form.
Shaw Gidley are experts in restructuring, turnaround and insolvency and provide free initial advice on these matters. Please contact our offices on (02) 4908 4444 or (02) 6580 0400.