Frequently Asked Questions

What is an undischarged bankrupt?

Firstly, we would like to welcome you to our blog.

Whether you are looking for more information about bankruptcy or contemplating bankruptcy, our aim is to provide you with information that is easy to understand and to assist you to navigate your solution for your financial circumstances.

In this blog, we are going to talk about what is an undischarged bankrupt and how bankruptcy is concluded.

An undischarged bankrupt is a person who is bankrupt, and the period of the persons bankruptcy has not finished. The standard period of bankruptcy is 3 years so if you are an undischarged bankrupt it most likely means that 3 years has not passed from when you became bankrupt.

We discussed what bankruptcy is in our blog: ‘Bankruptcy – what Is It?’ and this article can be accessed here.


QUICK TIP: The period of bankruptcy is 3 years and you are automatically discharged the next day. If you hear people saying that bankruptcy lasts for 3 years and 1 day, they are referring to the fact that you are discharged after 3 years and not on the anniversary of 3 years. So, if you became bankrupt on 30 June 2010 you would no longer have been bankrupt after the clock passed midnight on 30 June 2013.

It is important to note that whilst bankruptcy lasts for 3 years, you can cause the period of your bankruptcy to be less than 3 years by having your bankruptcy annulled. Also the period of your bankruptcy can be extended beyond 3 years if you do the wrong thing.

We will now discuss how you become discharged from bankruptcy automatically after 3 years and how the period of your bankruptcy can be made shorter or longer.

There are 2 ways you can exit bankruptcy, either by automatic discharge, or by the bankruptcy being annulled.


Automatic discharge from bankruptcy

The standard period of bankruptcy in Australia is 3 years.

If you file for bankruptcy yourself, you become bankrupt when your bankruptcy application is accepted by The Australian Financial Security Authority (AFSA). If a creditor applies to the Court for you to be made bankrupt, you become bankrupt when the Court issues a Court Order declaring you bankrupt.


QUICK TIP: If you file for bankruptcy yourself the three years of your bankruptcy starts when AFSA accept your application. If the Court issues an Order to make you bankrupt, the three years of your bankruptcy does not start till you have lodged a completed Bankruptcy Form with AFSA.

You are automatically discharged from bankruptcy after 3 years. It is automatic, you do need to apply or do anything. Also, the NPII is automatically updated to show that you have been discharged from bankruptcy.

Automatic discharge means that you are no longer bankrupt and subject to the restrictions of bankruptcy. Separately, even though it is unlikely to be the case, a person’s discharge from bankruptcy does not mean that the Trustees administration of the bankrupt estate has finished. When the Trustee has concluded his administration of the bankrupt estate, he lodges notice with AFSA that he has finalised administration of the bankruptcy.

It is important to note that liabilities caught by your bankruptcy do not return once you are discharged from bankruptcy. They are gone forever. They do not come back and cannot be reinstated. Likewise, assets caught by your bankruptcy that may not yet be realised by the bankrupt estate (for instance, monies owing by your company which is in liquidation), do not return to you once you are discharged.


Annulment of your bankruptcy

Whilst bankruptcy lasts for three years, if your bankruptcy is annulled, the period of your bankruptcy may be less than three years. There are three ways your bankruptcy can be annulled.

  • All your liabilities and costs of the bankruptcy are paid. In this situation your trustee will declare that your bankruptcy is annulled and advise AFSA. AFSA will record the annulment of your bankruptcy on the NPII.
  • The Court issues an order that you should not be bankrupt and annuls your bankruptcy. In this situation your Trustee will advise AFSA of the annulment and AFSA will record the annulment of your bankruptcy on the NPII.
  • At any time during your bankruptcy you can propose an offer to your creditors under Part 4 of the Bankruptcy Act. Your offer must give creditors a better result than they will receive from your bankruptcy. If your offer is accepted by meeting of your creditors, your bankruptcy is annulled upon the passing of the Special Resolution.


QUICK TIP: Unlike bankruptcy, if you enter into a Part 4 Scheme, you can be a director of a company and trustee of a self-managed super fund.

If you would like information on Part 4 Schemes and how they work, give us a call on 1300 719 854 or email


Objection to discharge

The period of bankruptcy can be extended if your trustee lodges an objection to your discharge from bankruptcy with AFSA. This is rare and will only occur if you do the wrong thing.


QUICK TIP: Your trustee does not have the power under the legislation to lodge an objection to your discharge from bankruptcy if you are doing the right thing.

We recommend that when you become bankrupt you establish a good relationship with your trustee. You do this by answering the trustee’s correspondence and questions in a timely manner and be helpful. The trustee is there to administer the bankrupt estate, not to give you grief. Do not put him in the position where he must lodge an objection to your discharge, to get you to do the right thing.

If an objection to discharge is filed, your bankruptcy may be extended to either 5 or 8 years. This is easily avoided if you comply with the trustee’s directions and meet your obligations. Also, it is common for the trustee to retract the objection to discharge once you have done what you should have done, enabling you to have automatic discharge from bankruptcy after 3 years.

It is rare for a trustee to lodge an objection to discharge. When it does happen, from our experience the most common reason for an objection to discharge being lodged is where people will not communicate with their trustee.



We trust this article has been of assistance. We are here to help you. If you have any questions please give us a call on 1300 719 854 or email:

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