Bankrupt for life?

An Australian personal bankruptcy lasts for a minimum of 3 years in Australia – whether it is an overly committed consumer or an economically impacted trader; and it can be extended up to 8 years. 

And in some cases, a person’s bankruptcy can last for many years, until their death and beyond. 

There are around 4,000 such persons in Australia who are bankrupt interminably. This may often be because of their own ‘fault’, but does that justify this rather extreme feature of Australian bankruptcy law?  

NOTE: the Federal Court hearing in the matter of Talent, referred to below, will be on 25 August 2020 at 10am.

The law

If a person is made bankrupt by court order, the law requires them to file their ‘statement of affairs’ (SOA) within 14 days: s 54 Bankruptcy Act.  As a means of prompting the new bankrupt to attend to that responsibility, the start of the 3 year period of a court ordered bankruptcy is deemed not to commence unless and until that SOA is filed.  The sooner it is filed, the sooner – after 3 years – the person can be discharged.

But if the SOA is not and never filed, the person is not discharged and remains bankrupt. Section 149 of the Act was amended to that effect in 1991.

AFSA records that there are around 4,000 persons who remain in one these continuing bankruptcies because they have not submitted a SOA.  These include 2,310 persons who remain bankrupt for over 10 years and another 1,515 who remain bankrupt between 5 and 10 years.

Even if one of those bankrupts were to die still without having filed a SOA, the bankrupt deceased estate continues: s 63; although it seems that an administrator of the deceased estate can file the SOA.[1] By that time, it may be many years later and of little consequence, though a deceased’s bankruptcy can be annulled.[2]

Lost in delivery

After that law was introduced in 1991, circumstances arose where the SOA was ‘lost in delivery’, and was not formally filed, with neither the bankrupt nor the trustee being aware, leading to injustice to the bankrupt.

Section s 33A was enacted to address that unfairness.[3] It provides that if the court is satisfied that a bankrupt believed on reasonable grounds that their statement of affairs had already been filed at a time before it was actually filed, the Court could so order.  That belief can often not be proved.

When the reality hits home

It is when a person who remains bankrupt after many years tries to borrow money, or is the beneficiary under a will, that the lurking legal issues are activated and complexities arise.

A live matter is that of a Mr Talent.  He was made bankrupt by the court on 26 May 2000 but, it appears, he has not filed his SOA. The reality of his bankruptcy appears to have arisen when his mother died in 2018 and made no provision for him in her will and left the house in which he lived to his sister. In August 2019 he applied for orders under the ACT Family Provision Act 1969 seeking to challenge his mother’s will.

He also claims in his court application that “due to irregularities in the way his bankruptcy has been handled, he should be discharged from bankruptcy”[4] – that is, he is applying for a declaration to the effect that his bankruptcy was discharged no later than 26 May 2004; or, for an order that he file a SAO and that it be treated as having been filed on 26 May 2004, pursuant to s 33A.

That matter is again listed before the Federal Court on 4 August 2020.[5]

If such an application is not successful, the only way a bankrupt can end their bankruptcy and remove the legal impediment of bankruptcy is to file their SOA, belatedly, and wait out the 3 years.[6]

Others who do not, or refuse to, can cause other problems, and these may require policy and law reform attention.


One reform could be to allow some cut off point in time, say 5 years, and absent any further issues arising, there is an automatic discharge.  One criterion for allowing this is that the trustee has made all reasonable attempts to obtain a SOA but has been unsuccessful; and that should include having AFSA use its own powers, under s 77C, to try to have the bankrupt comply.

In practice

As to what a trustee does with such bankruptcies, once no further reasonable efforts can be made to secure the SOA, the estate can be finalised.

Once the trustee notifies AFSA of that and AFSA records this on the NPII, the 7 year period of potential liability for the trustee begins to run.


[1] Robinson, in the matter of Stevanovic; National Australia Bank Limited v Stevanovic [2011] FCA 359.


[2] Re Wilkinson (1970) 16 FLR 414; also 17 FLR 327.

[3] See Jovanovski v Official Receiver, Australian Financial Security Authority [2018] FCCA 1193 at [150]

[4] Talent v Official Trustee in Bankruptcy [2019] ACTSC 274


[5] ACD98/2019

[6] Excluding annulment, etc.

Print Friendly, PDF & Email

Leave a Reply

Your email address will not be published.