Overseas Travel in Bankruptcy

An important condition placed on all bankrupts in Australia is the restriction on unauthorised overseas travel. An undischarged bankrupt must obtain permission from their trustee prior to arranging and undertaking overseas travel. There are no restrictions on travel within Australia whilst bankrupt.

Section 272 of the Bankruptcy Act 1966 (“the Act”) imposes a maximum penalty of three years imprisonment on a bankrupt if they have not obtained their trustee’s permission before leaving Australia. Importantly, this penalty can apply even if they have not yet left Australia but have undertaken acts preparing to leave, without first obtaining their trustee’s permission. The maximum penalty is increased to five years imprisonment if the bankrupt’s intention was to defeat or delay their creditors.

To prevent a bankrupt from undertaking unauthorised overseas travel a trustee may implement several safeguards. Typically, a trustee will require a bankrupt to deliver up all their current passports, issued by Australia and foreign countries, to be held by the trustee until they are released for authorised travel or until the bankrupt is discharged. A trustee may also request the Australian Federal Police to place a border alert on a bankrupt via the Passenger Analysis Clearance and Evacuation System (“PACE”). When a bankrupt attempts to leave Australia, Border Force officers acting on a PACE alert will prevent the bankrupt from passing through the border without the explicit approval of their trustee. This potentially embarrassing situation can be avoided by the bankrupt following proper procedures to obtain prior permission to travel and confirmation that their trustee has removed any active PACE alerts.

When a bankrupt is seeking to obtain permission to travel overseas there are a number of factors their trustee will likely take into consideration at the time. These factors may include:

  • Whether the bankrupt has been compliant with their trustee’s directions to date;
  • Whether there are any outstanding matters, legal or otherwise, requiring the bankrupt to be present in Australia;
  • If the bankrupt is required to make contributions from their income to their estate, whether those contributions are up to date and whether they will be affected by overseas travel;
  • If the bankrupt is considered a flight risk and unlikely to return when required; and
  • How the travel is being funded and the duration of absence from Australia.

Certain conditions or requirements might be placed on a bankrupt when travelling overseas and permission to travel might only be granted subject to those conditions. For example, a trustee may require some form of bond or security to be provided as collateral to ensure the bankrupts timely return to Australia. Contact details whilst overseas will need to be provided and the trustee may require the bankrupt to check in at certain times to monitor their movements according to their itinerary.

William Buck provides Registered Trustee services to individuals in financial distress. If you need any guidance or assistance with a corporate restructuring, insolvency or a personal bankruptcy matter, please contact one of the William Buck Business Recovery Specialists.