If you become bankrupt (or receive a related relief from debt) your ability to deduct deferred losses in future years is affected, and the deferred losses will no longer be available. The loss cannot be deducted in the current or any future year.
Last year, Peta had a $5,000 non-commercial loss from a business activity. The legislation defers that loss to a future year. In the normal course of business the $5,000 loss could be deducted against future profits of that business activity. However, when Peta becomes bankrupt this year, this restriction prevents the $5,000 loss ever being deducted.