Have you recently been declared bankrupt and received a letter informing you that you’re currently an undischarged bankrupt? Or, have you been notified that you’re now a discharged bankrupt?
Although both of these terms are applied during the bankruptcy process, their meanings are very different, and the term that’s applied to you depends on your current financial situation.
If you want to know what these terms mean and what the difference is between a discharged and undischarged bankruptcy.
Read along!
What is Discharged Bankruptcy?
According to the Australian Financial Security Authority (AFSA), having a discharged bankruptcy confirms that your period of bankruptcy is over and that you’re not an undischarged bankrupt anymore, meaning you’re no longer bankrupt.
You should be aware that your date of discharge will depend on the type of bankruptcy. An automatic discharge of bankruptcy generally occurs automatically 3 years and 1 day from when AFSA accepts your statement of affairs. The date AFSA accepts your statement of affairs is known as your date of bankruptcy. Due to this generally being an automated process, you don’t need to apply to be discharged from bankruptcy.
However, it should be noted that your bankruptcy period could be extended. Furthermore, in accordance with section 152 of the Bankruptcy Act 1966 (Cth), you’re also obligated to continue to assist the bankruptcy trustee in finalising any outstanding payments.
It’s important to know that discharged bankruptcies will permanently remain on the records of the credit reporting organisations such as the National Personal Insolvency Index (NPII). You can contact these credit reporting organisations to ensure they update your file to show the discharge date.
What is Undischarged Bankruptcy?
In contrast, being an undischarged bankrupt refers to when you still owe money and you’re still legally required to continue paying your debt. If you’re a manager of a corporation, director of a company or a company officer, you’re automatically disqualified from your duties during the time you’re an undischarged bankrupt.
Therefore you’ll need to notify the Australian Securities Investment Commission(ASIC) of your termination of director or manager duties. Additionally, an undischarged bankrupt doesn’t have an order of discharge by the court. Therefore, you won’t be able to borrow from financial organisations. Other obligations during undischarged bankruptcy include the following:
- You must let lenders know that you’re an undischarged bankrupt when trying to apply for credit over a specific amount
- You’ll be required to provide any income you make over a certain amount to the trustee of your bankruptcy
- If you want to leave Australia to travel overseas, you have to obtain permission from your bankruptcy trustee
- You need to provide any information in relation to your financial situation to your bankruptcy trustee
What’s the Difference between Discharged and Undischarged Bankruptcy?
So, you may be wondering what’s the difference between discharged and undischarged bankruptcy. The main difference between them is in the restrictions that are legally binding.
When you’re a discharged bankrupt, you’re able to borrow from financial organisations. In contrast, as an undischarged bankrupt, you’re legally prohibited from borrowing from financial organisations. It can be helpful if you create a register of debentures to assist in creating a provision for the repayments of the debt.
Conclusion
To summarise, the main difference between discharged and undischarged bankruptcy relates to their legal obligations and requires an understanding of those legal obligations. Being aware of the terms and the ways they can affect you is important in avoiding further legal liability.
The ability to consider different methods of financial avenues is crucial to repay your debts and comply with your obligations.
The legal processes relating to discharged and undischarged bankruptcy can be complex. You should hire a lawyer for legal advice when you receive a notice declaring you’re an undischarged bankrupt to ensure you fulfil your legal obligations and repay your debt.
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