What is Bankruptcy? – Bankruptcy Overview

So you might be considering bankruptcy but unsure of what happens next? So what is bankruptcy? Bankruptcy is when you are unable to pay your debts and cannot come to suitable repayment arrangements with your creditors, you may voluntarily petition to become bankrupt. At the time of petitioning, you must be present in Australia or otherwise have an Australian connection (eg you ordinarily live in Australia or are involved with a business operating in Australia).

Bankruptcy is not the end of the world, it some cases it can bring new beginnings for most people that have been stressed out over mounting debt and financial hardship.

So what happens when you become bankrupt?

Bankruptcy will generally lasts for a period of three years but in some cases can be extended depending on the circumstances. There will be a permanent record of your bankruptcy on the National Personal Insolvency Index (an electronic public register which can be accessed by anyone for a fee).

Your creditors will be notified of your bankruptcy and unsecured creditors should stop pursuing you for payment of your debts as they now realise you have nothing to offer or provide.

Once you file for bankruptcy a trustee will be appointed to your bankruptcy case. In order to pay your creditors, the appointed trustee will:

  • sell your assets (although you will be able to keep certain types of assets)
  • mandate contributions from your income once you earn over a certain amount
  • investigate your financial affairs and may recover property or money that you have transferred to someone else for inadequate consideration

The duties of a trustee are specified in legislation, trustees must adhere to certain standards while administering your estate. You can choose to appoint a registered trustee by obtaining and providing their consent when you lodge your petition to become bankrupt. If you do not choose a trustee, the Official Trustee (ITSA) is initially appointed to administer your estate. Your creditors may choose to change the trustee at any time.

In closing always remember that creditors can also apply to the court to make you bankrupt if they can satisfy the court that you owe them money above a minimum amount.

NOW THAT YOU UNDERSTAND “WHAT BANKRUPTCY IS” Contact Insolvency Professionals on 0417 629828.

 

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