Ending Bankruptcy Early by a Section 73 Composition

Bankruptcy usually lasts for three years. There are however, ways for a person to exit a bankruptcy sooner. In this article, we look at how to end your bankruptcy early by way of a Composition under Section 73 of the Bankruptcy Act 1966 (Cth) (Section 73 Composition).

Early Exit from Bankruptcy

If you are a bankrupt, you are able to put forward a payment proposal to creditors in satisfaction of your debts (Section 73 Proposal). Once a proposal is drawn up, your bankruptcy trustee will hold a creditors’ meeting and advise creditors whether he or she considers your Section 73 Proposal should be accepted. Creditors then vote on the proposal. The proposal is accepted if it is approved by a majority in number of creditors whose debts comprise at least 75% of the value of debts. This only relates to creditors who vote at the meeting and if creditors don’t vote then they don’t get a say.

Naturally, creditors will be more willing to accept a Section 73 Proposal if it offers a better return than what will be received under a continued bankruptcy. It simply is not feasible if the proposal results in a lesser return.

A Section 73 Proposal will commonly involve:

  • Payment of amounts over time by instalments by the bankrupt; and/or
  • Payment of a lump sum amount by a relative or associate of the bankrupt; and/or
  • Certain creditors associated with the bankrupt agreeing not to claim for a dividend if the proposal is accepted.

Effects of Acceptance of Section 73 Proposal

Your bankruptcy will end upon the acceptance of the Section 73 Proposal by creditors. This can mean:

  • Your income will no longer be subject to assessment by your Bankruptcy Trustee.
  • You will be allowed to travel without the restrictions commonly associated with bankruptcy;
  • You can be appointed a company director;
  • You may be able to retain certain assets if the Section 73 Proposal provides for it; and
  • You can obtain finance or credit easier and sometimes without the need to disclose the bankruptcy.

Things to Note

While most bankruptcy restrictions will be lifted, there are a number of things to note with regard to a Section 73 Composition:

  • Credit reporting agencies have their own discretion as to how it affects a credit rating;
  • A record of bankruptcy will still remain on a Government Register; and
  • There is no automatic discharge of debts owed under the bankruptcy. That is, if the Section 73 Proposal and the resulting agreement are not carefully drawn up, creditors may still pursue their debt once the bankruptcy has been finished. As such, any proposal and the resulting agreement must be drawn up with professional advice and by experts. This is where our decades of collective experience as bankruptcy trustees can help you.

Contact Us For Assistance

If you are a bankrupt and are looking at ways you can end your bankruptcy sooner, please contact our Brisbane or Gold Coast office for a free, no-obligation consultation. Our experienced staff will be able to explain the options that are available to you and assist you.


We’re happy to answer any questions you may have, so please don’t hesitate to call us and schedule a consultation.



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Brisbane Qld 4000


Phone: 07 3221 0055
Fax: 07 3221 8885

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