If you are considering declaring yourself bankrupt, or a creditor has started taking steps to have you declared bankrupt, then understanding Australia’s bankruptcy laws is going to be important for what could happen in the coming weeks. As well as taking the time to understand Australia’s bankruptcy laws, you should also consider the consequences of bankruptcy and explore whether there may be an alternative solution to your debt problems.
Bankruptcy provides a degree of protection to individuals that are unable to meet their debt obligations to creditors, or come to a mutually agreeable arrangement for paying some or all of the debt. While a number of options are available as an alternative to bankruptcy, such as formal and informal agreements and debt consolidation, these may not be viable solutions if you’re on the verge of bankruptcy proceedings commencing.
Bankruptcy can happen in two ways should agreements be unable to be reached between a borrower and a creditor:
“As well as taking the time to understand Australia’s bankruptcy laws, you should also consider the consequences of bankruptcy and explore whether there may be an alternative solution to your debt problems.’
You can file for bankruptcy voluntarily regardless of how much debt you hold, and you do not have to hold a certain level of debt before you can do it, either. There are also no limits regarding property you own or your income; the only requirements for filing for voluntary bankruptcy are that you are an Australian citizen living in Australia at the time of becoming bankrupt, or you own a home or a business in the country.
Having considered bankruptcy alongside the alternative solutions available, and decided you wish to go ahead with a voluntary bankruptcy, you will need to instruct a registered trustee who will guide you through the whole process. The following forms will need to be completed and filed with the Australian Financial Security Authority (AFSA):
Once these documents have all been filed you are free to commence the bankruptcy process.
Depending on your income and financial circumstances, you may need to pay a contributory figure from your income to service your bankruptcy. Certain assets, including your house and car, may also be sold to service the bankruptcy and pay your creditors. Other assets may also be sold, and you should discuss your individual situation with your registered trustee or the AFSA to understand which of your assets may be sold to service the bankruptcy and pay creditors.
Australian bankruptcy law states that you will remain bankrupt for at least three years. If you have co-operated with your registered trustee throughout this three years then you will likely be discharged from the bankruptcy. If you do not co-operate throughout the three years you may remain bankrupt for up to eight years.
“Australian bankruptcy law states that you will remain bankrupt for at least three years.”
Not all of your debts can be included in a bankruptcy. Although most creditors will be unable to continue to chase you for repayments, you cannot include the following debts in your bankruptcy:
Bankruptcy can affect your career as you may be unable to enter certain industries or professions, gain certain licences, or become a member of particular professional institutions because of it. If you are employed you should discuss the potential consequences of bankruptcy with your employer and how it relates to your current job.
Now you are aware of the potential consequences of bankruptcy and have an overview of Bankruptcy Law, you will be much better equipped to make a decision around filing for bankruptcy or attempting to come to a resolution with your creditors.
Please seek independent legal advice for specific cases. This article is for general information only.
Disclaimer: This article contains general comments and recommendations only. This article has been prepared without taking account of your objectives, financial situation or needs. Before taking any action, you should consider the appropriateness of the comments made in the article, having regard to your objectives, financial situation and needs. If this article relates to the acquisition, or possible acquisition, of a particular credit product you should obtain and consider the relevant disclosure documents before applying for the product.
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