Do you want to make a proposal to your creditors to satisfy your debts and end your bankruptcy early? If so, read on.
For most people, bankruptcy ends on the discharge of the bankrupt three years after the statement of affairs was filed. However, during your bankruptcy you may find yourself in a position to make a proposal to your creditors to satisfy your debts and consequently, end your bankruptcy early. The proposal is made by your bankruptcy solicitors pursuant to Section 73 of the Bankruptcy Act 1966 (Cth).
Such a proposal must be made with funds and assets that wouldn’t otherwise be available to creditors under the bankruptcy. Most frequently, funds are borrowed from friends or family. You will have to disclose to your bankruptcy trustee the source of the funds. They may also ask for you to provide evidence that the funds are actually from the source you claim.
The proposal must be sent in writing to the bankruptcy trustee and must allow for payment of the trustee’s fees and expenses (presently 20% of the composition funds plus the cost of the creditors meeting) and payment of the realisations charge (presently 7%). A lump sum as opposed to “x” cents in the dollar should be offered as creditors’ claims may vary from what you believe is owed.
When considering the quantum of your offer, you must consider whether the creditors will receive a larger distribution under your offer when compared to the continued bankruptcy. Creditors tend to look favourably upon these offers. Prior to making a proposal to your bankruptcy trustee, you and your bankruptcy lawyers should enquire with your creditors as to whether they would be willing to accept your offer.
The trustee will then prepare its report about your offer to creditors and hold a meeting of creditors. For your proposal to be accepted, a special resolution of creditors must be reached meaning the majority in number of creditors and 75 of the dollar value must vote in favour of your offer.
If your Section 73 proposal is accepted, your bankruptcy is annulled and you will be released from all your debts except those debts which you would not have been released from had the bankruptcy run its normal course. If you fail to comply with the terms of the proposal, you can be made bankrupt again by the Court.
If it is rejected, the bankruptcy will continue as if the proposal had never been put to creditors. You and your bankruptcy solicitors may also consider making a further offer if your offer is rejected by your creditors.
If you are currently an undischarged bankrupt and are considering making a Section 73 proposal, Butler McDermott’s Nambour bankruptcy lawyers in Sunshine Coast can assist. Please contact our Nambour legal team to discuss bankruptcy legal advice.
This bankruptcy law article is not intended to advise you in relation to your specific circumstances and should be used as a general guide only. For bankruptcy legal advice contact our bankruptcy lawyers in Sunshine Coast at Butler McDermott law firm Nambour.