The misconceptions of travelling when bankrupt.
It is a persistent misconception by people contemplating going bankrupt that they will have to surrender their passport and will not be able to travel overseas for the three years of bankruptcy.
There are many reasons why a Bankrupt may need or wish to travel overseas: work-related travel, visiting unwell relatives or joining a family holiday.
Do I have to surrender my passport?
It is true that a Bankrupt is obliged under Section 77(1)(a)(ii) of the Bankruptcy Act 1966 to surrender their passport. 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.
Where do I sign up?
Before leaving Australia, a bankrupt must request their trustee’s permission to travel.
As part of this request process, it is helpful if the bankrupt provides information regarding:
the purpose of their trip, (including a letter from an employer evidencing work travel if applicable),
the destination, leaving and return dates
who will be paying for the trip
contact details, including email addresses, phone number and accommodation details.
This information speeds up the approval process. A trustee asks these questions to comply with their duties and the answers might impact on the trustee’s approach to any matters disclosed in the Bankrupt’s statement of affairs, any income contributions the bankrupt must pay during the time away. Importantly the compliance with information requests to date may impact the Trustee’s decision when considering an application.
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 processing fee and 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".
It is important that the application is made with plenty of time for the Trustee to process or make further enquiries.
What happens if the application is refused?
If travel is refused by a trustee for whatever reason, the bankrupt can appeal through the government regulator: the Australian Financial Security Authority (AFSA).
Conclusion
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, Worrells has dozens of undischarged bankrupts overseas on holiday, visiting sick relatives, and even a few living and working abroad.
