Duration of bankruptcy
How long does bankruptcy last for? What happens if I come into some money during bankruptcy? Can I use this to get out of bankruptcy?
Hi there,
Presently, a bankruptcy lasts for 3 years from the date the statement of affairs is submitted. There is currently legislation not yet in force which will reduce this to 1yr, though maintaining other obligations for the full 3yr period. Whether this will apply retrospectively is yet to be seen.
To answer your second question, if you inherit money or win the lotto, it is technically property that vests in the trustee (and therefore, available to your creditors) if this occurs during the period of your bankruptcy. If it pays your debts in full, including the trustee's fees/costs, then your bankruptcy can end through this process.
Alternatively, to end a bankruptcy early (generally speaking) you can propose a composition to creditors (often called a s73 Composition). The affect of this would be to annul the bankruptcy (as though it never occurred). You might propose to creditor to pay them 20 cents in the dollar to annul your bankruptcy, if a majority in number and value agree, then your annulment is put into effect (provided you pay). Often making a s73 Composition will cost further amounts to pay for the trustee's fees in dealing with the proposal.
Suggested way forward
You need to determine when you became entitled to the incoming funds (not when you received them). If this is during your bankruptcy, then your trustee will, as a matter of law, have an entitlement to them and you won't be able to rely on them for a s73 composition. With that said, you should also check with your trustee what their current fee/cost position is and how many creditors have proven in your bankrupt estate and for what amount. If the amount of your windfall is greater than these combined amounts, then your bankruptcy may be capable of ending early because all your debts are paid in full.
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