Insolvency is generally the term used when a company or individual are unable to pay their debts when they fall due. In Australia, bankruptcy is the term used for personal insolvency, or in other words, when a natural person (not a company) is unable to meet its debts. It is a legal process where you are declared unable to pay your debts.
The effect of a bankruptcy is that it can release you from most debts and allow you to make a fresh start. This can happen voluntarily, under a debtor’s petition. This is an application you make to declare yourself bankrupt.
It is also possible that somebody that owes you money, commonly referred to as a ‘creditor’, can file a Creditor’s Petition in Court and seek that you be declared bankrupt.
How long does the Bankruptcy last?
A bankruptcy will normally last three years and 1 day. At the end of this period, you are released from most your debts and discharged from bankruptcy.
Who will manage my affairs while I am Bankrupt?
A Bankruptcy Trustee will be appointed, who is generally a person or body who manages your bankruptcy. This can either be the Official Trustee (Australian Financial Security Authority or AFSA) or you can nominate a registered trustee that you choose.
What are the steps to making somebody Bankrupt?
Briefly, the steps below outline the process:
- Get a court judgment or order.
- Apply for a Bankruptcy Notice.
- Serve the Bankruptcy Notice.
- File a Creditor’s Petition with the courts.
- If a court accepts your Creditor’s Petition, they may grant a sequestration order. This declares a person bankrupt and sequestrates their assets.
Are you thinking of Bankruptcy?
There are serious consequences involved when being declared bankrupt.
You may lose some of your assets and it could affect your ability to obtain credit, travel overseas, and gain some forms of employment.
If you are drowning in debt and are thinking about entering into bankruptcy, it is highly recommended that you seek legal and financial advice to find out what is the best option for you to deal with the unmanageable debt.
It is important to know that bankruptcy is only one formal option available under the Bankruptcy Act. If you would like to discuss what other options might be available to you or fit your circumstances, get in touch with the experienced bankruptcy lawyers at Rockliffs Lawyers in Sydney so we can guide you through the process.