What factors do bankruptcy trustees consider?
Whether bankrupts can travel overseas during their bankruptcy is something that we are frequently asked. This article dispels some of the rumours and uncertainties that exist.
Firstly, what does the law say? It is true that when a person becomes bankrupt they must surrender their passport to their bankruptcy trustee. It is also true that it is an offence for a bankrupt to prepare for overseas travel without their trustee’s written consent. Not adhering to these provisions can mean an extension to the bankruptcy period, and in extreme cases, a bankrupt could even be convicted and face imprisonment.
In saying that, the trustee’s role is to be a custodian of the passport—not to stop a bankrupt from travelling where there are legitimate reasons to travel.
Before leaving Australia, a bankrupt must request their trustee’s permission to travel. As part of this request process, the bankruptcy trustee will likely ask questions such as: ‘where are you traveling to?’ and ‘who will be paying for the trip?’ A trustee asks these questions to comply with their duties and the answers might impact on the income contributions a bankrupt must pay.
Before approving a travel request the trustee may:
- Request the bankrupt to pay any income contributions outstanding.
- Place conditions on the period of travel.
In some cases, the trustee may also request a ’bond’ payment before approving travel. This bond is refundable upon the passport’s return and agreed travel terms being met. Bonds, or sureties, are occasionally requested where there are concerns about the bona fides of the trip, or suspicions the bankrupt may intend to abscond to ‘defeat creditors’.
If travel is refused by a trustee for whatever reason, the bankrupt can appeal through the government regulator: the Australian Financial Security Authority (AFSA).
In summary, an undischarged bankrupt who complies with their requirements under the Bankruptcy Act 1966, should not be concerned that travel will be unduly restricted. In all but exceptional cases, travel requests are approved; and in most instances without a bond or surety. These approvals happen every day. When writing this article, the Worrells Melbourne office had dozens of undischarged bankrupts overseas on holiday, visiting sick relatives, and even a few living and working abroad.