Annulment of bankruptcy

Contributed by Ian Macdonald and current to 1 September 2005

Annulment, like discharge, means that a bankruptcy comes to an end. The important difference between annulment and discharge is that when a bankruptcy is annulled, the person is seen by the law, for most purposes, never to have been bankrupt. This may be particularly valuable to a young person who may wish to borrow later on, or go into an occupation where it is important never to have been bankrupt.

Annulment of bankruptcy can come about in one of three ways:

• payment in full of the bankrupt’s debts. The debts here include interest on those debts that bear interest, and ITSA’s costs of running the estate. As soon as the debts are paid in full, the bankruptcy is annulled without the bankrupt having to go to Court;

• a section 73 annulment, which is an agreement with creditors after bankruptcy. The bankrupt puts an offer to ITSA, which circulates it amongst the creditors. If a majority in number, and three quarters in value of creditors approve, the bankruptcy is annulled by their agreement. No Court application is required; and

• a bankruptcy may be annulled if a Court is satisfied the bankruptcy should not have occurred. An example could be a creditor forcing a bankruptcy by acting unlawfully, or following the incorrect procedures.