Bankruptcy is a legal status that offers protection to people who are unable to repay their debts and unable to negotiate a payment agreement with creditors. This status gives a bankrupt legal protection from being chased by creditors and at the end of the bankruptcy period all prior unsecured debts are fully settled.
Insolvency Trustee of Australia, ITSA administers and regulates the bankruptcy process.
You can be made bankrupt in one of 2 possible ways, either by one of your creditors if you owe them more than $2,000 and default on making repayments or voluntarily by declaring yourself bankrupt.
How can a creditor force my bankruptcy?
A creditor who claims that you owe them money is able to make an application to the Federal Court or the Federal Magistrates Court to declare you bankrupt. This application is known as a Creditor’s Petition. To declare you bankrupt the creditor must adequately prove in Court that you have committed an act of bankruptcy. In most cases this means failing to make payments on outstanding debts as you are directed to do by ITSA following the issue of a bankruptcy notice. If you fail to pay the amount of a judgment debt within the time specified in the bankruptcy notice, a court may decide to declare you bankrupt.
Among other things the Court will consider whether:
- you are the person responsible for the debt
- the amount of the debt shown in the bankruptcy notice is correct, and
- you are able to pay your debts.
How do I declare voluntary bankruptcy?
If you would like to declare yourself bankrupt all you need to do is complete and lodge a set of forms either directly with ITSA or through a Registered Bankruptcy Trustee. These forms are a Debtor’s Petition, a Statement of Affairs and Acknowledgement that you have received and read the “Prescribed Information” issued by ITSA.
How long does bankruptcy last?
If you completely abide by all the rules and conditions established by your Bankruptcy Trustee the Bankruptcy should only last for three years, although it can be extended to five or eight years in certain circumstances. If you come into some money during the bankruptcy process you may be allowed to repay agreed debts and settle your bankruptcy sooner.
To find out more about any aspect of Bankruptcy as a debt solution please contact our debt specialists on 1300 300 121 or complete our short inquiry form. This is an obligation free inquiry and may prove to be the most significant conversation that you have had for some time.