If you are facing bankruptcy, you may not be sure where to turn or what to do next. For some people, the thought of bankruptcy brings with it feelings of shame and despair, but this can be minimized by knowing where you stand under the law.
This article contains information about the bankruptcy laws in Australia that will help you navigate through this difficult time in your life. It’s important to note that these laws vary slightly from state to state, so make sure you are familiar with the bankruptcy laws in your particular state before taking any action or applying for any kind of bankruptcy relief or discharge order.
What Is Bankruptcy?
The legal status of a person or business that cannot repay its debts and has no other means of raising funds. It is more than just declaring that you’re insolvent – legally, there are two forms: ‘voluntary’ and ‘involuntary’. A voluntary bankruptcy involves seeking protection from creditors through a submission filed with the courts. Involuntary bankruptcy happens when an external party applies for an administrator to be appointed to administer all of your assets.
The Insolvency and Trustee Service of Australia (ITSA) is an Australian Government agency that administers trustee services and helps creditors get back their money. A trustee is a third party that manages someone’s assets and income to help pay off debts. Trustees make sure you don’t lose your assets like property or your business while repaying creditors.
Australia’s Bankruptcy Laws
If you find yourself unable to repay your debts, there are two options available for you under Australian law. The first is called a Part X arrangement, while bankruptcy is known as a Part XIIIA debt agreement. A key difference between these arrangements is that while only creditors with an interest in more than 50% of your assets can force you into bankruptcy, anyone can take advantage of a Part X arrangement at any time.
A Part X arrangement lasts for three years and requires you to repay as much of your debt as possible during that time. When it comes time for your meeting with creditors, you’ll need to provide them with information about your financial situation, how you plan on paying off your debts over time, and why you aren’t able to pay back everything at once.
Who Should Consider Declaring Bankruptcy?
If you’re not sure whether bankruptcy is right for you, it’s time to call insolvency professional. Every case is different, but it’s helpful to get an idea of your options before deciding. And when you need advice that will help you figure out what steps to take next, there’s no substitute for expert advice from someone who knows how debt relief works in Australia and can advocate on your behalf.
How Can You Declare Bankruptcy?
Before you can proceed with filing for bankruptcy, you must first satisfy certain basic requirements set by law. One of these is that you must be insolvent—or unable to pay your creditors when they come asking. It’s also required that you try and avoid defaulting on payments before declaring bankruptcy. So how do you know if you qualify? If your income cannot cover your living expenses and your creditors, then chances are pretty good that you’re insolvent and eligible for bankruptcy proceedings.
How Long Does Bankruptcy Last?
The time it takes for bankruptcy to become legally binding varies. It’s between one and three years, with most people entering into a Deed of Company Arrangement, which lasts for three years. That means if you can’t come up with a plan to repay all of your debts within that time, you will be bankrupted for three years. Once you are declared bankrupt, your credit report is published on an online database which is available to anyone who wants to look at it.
The first step is for a creditor or other interested party to file what’s called a bankruptcy notice with the Federal Court of Australia. The bankruptcy notice must be filed and served on all creditors, debtors, and directors of companies involved, along with any other person specified by Federal Court of Australia rules. This has to be done within 15 days of first realizing that a debtor is not meeting their obligations. A hearing will then be sent within 30 days.
How Are Bankruptcy Proceedings Commenced in Federal Court of Australia?
A creditor who wishes to have a debtor declared bankrupt must file a Petition for an Order of bankruptcy with the Federal Court. A creditor cannot start bankruptcy proceedings without filing a Petition for an Order of bankruptcy.
If you are applying for bankruptcy, then you can file a Statement of Affairs with Federal Court. A creditor must file a Statement of Affairs if a debtor owes them money and they want to be repaid from a bankrupt estate. Your statement of affairs must be complete and truthful. If it isn’t, then there could be consequences later on down the track when you come out of bankruptcy.
If you’re reading up on bankruptcy laws and requirements, then there’s a good chance that you’re about to make one of two decisions: file for bankruptcy, or avoid. But whatever your decision may be, know that both are completely valid choices with their benefits.
- Who can file bankruptcy in Australia?
If you’re having trouble paying your debts and can’t find a way out, you might consider filing for bankruptcy. The good news is that it is legal and recognized as a debt resolution option by creditors.
- What does it mean to declare bankruptcy?
You can get your finances back on track by declaring bankruptcy, but it’s not a decision you should take lightly. While there are certain circumstances when filing for bankruptcy may be appropriate, keep in mind that it does come with several consequences.
- Will the bankruptcy harm my credit rating?
Bankruptcy will hurt your credit rating. This isn’t necessarily a bad thing, however, because after you complete your bankruptcy, your credit score should increase.
- Who decides if I get a discharge?
The official receiver will decide whether or not you get a full discharge if your income is high enough and there are no other costs involved. If your income isn’t sufficient, you may only be able to get a partial discharge.
- Costs involved in bankruptcy
It is important to understand that bankruptcy is not free. The costs will depend on your situation. Each jurisdiction has a different approach when it comes to calculating these costs.