Bankruptcy is a government legislated process that is designed to create a fair outcome for all involved when someone is unable to honour their debts. For the individual, it provides relief from the stresses of unmanageable debt and legal protection from their creditors. It also helps the creditors, in that it creates a system by which any recoverable funds are distributed equitably. To declare yourself Bankrupt in Australia you need to be a permanent resident, and be insolvent, which simply means that you are unable to pay your debts as they fall due.
The Bankruptcy process begins when the appropriate paperwork is lodged with the Australian Financial Security Authority (AFSA) and you are appointed a Bankruptcy Trustee. Depending on how the Bankruptcy has come about, this can be either a private Registered Trustee, or AFSA. From this point on, both you as the Bankrupt person and your Trustee have certain obligations. The Trustee has to investigate your financial affairs and determine whether there are any funds that can go toward your Bankrupt Estate, either from the sale of assets that have available equity, or if you earn enough, contributions from your income. Your responsibility is to assist these investigations, by truthfully disclosing such aspects of your financial situation, and providing your Trustee with any information and documentary evidence that they require. If any funds do become available in your Bankrupt Estate they are distributed to your creditors by your Trustee, with each creditor receiving the same percentage of their provable debt.
The Bankruptcy process usually lasts for three years, which means that all income and assets that you acquire during this time, as well as any assets you may have sold or transferred before your Bankruptcy began, are subject to investigation by your Trustee. Most people are discharged from their Bankruptcy after three years; in some circumstances though, such as when you don’t comply with your Trustee’s requests, an objection to your discharge can be lodged. This can extend the term of your Bankruptcy to five, or even eight years. Once you are discharged from your Bankruptcy you are released from those debts that were included in it – note that Bankruptcy does not stop any secured creditors from realising their security, and it does not release you from certain debts such as fines and Child Support.
Bankruptcy is a serious step and as such, you should not make any decisions before seeking professional advice. Our consultants have years of experience in dispensing Bankruptcy advice, and our company is run by a Registered Trustee in Bankruptcy. Call the Australian Bankruptcy Service today on 1800 462 767 and ensure that it is going to be the right decision for you and your financial needs.