A creditor can force you into bankruptcy by approaching the court for a bankruptcy order (or sequestration order) to be issued.  This type of bankruptcy is known as a Creditor’s Petition.

The first step toward making you bankrupt is to issue you with a Bankruptcy Notice, which usually allows you 21 days to respond. If you do not respond satisfactorily they can then go on to file the Creditor’s Petition, and it is this that will actually make you Bankrupt when the Court hears the petition.

A creditor can file a Creditor’s Petition if:

• you owe them at least $5,000;
• a Court has issued a judgement to support the debt; and
• a Bankruptcy notice has been issued and after 21 days the debt remains unpaid.

If you are made bankrupt by way of a Court order, you will have no control over who your Bankruptcy Trustee is. The petitioning creditor will usually nominate a Registered Trustee of their choosing, in which case they will have a signed Consent to Act as Trustee ready for the day you are made Bankrupt. If they do not have a Consent to Act from a Trustee, the Official Trustee from AFSA will automatically be appointed. They can then either keep the appointment or outsource it to a Registered Trustee of their choosing.

If you are issued with a bankruptcy notice and a Creditor’s Petition, there is not much that you can do to stop it. Depending on your circumstances though, you might have an option to avoid bankruptcy, which is to propose a Debt Agreement or Personal Insolvency Agreement instead. Either of these will involve paying back a percentage of your debt, a higher percentage than what your creditors would get if they made you Bankrupt. They take time to set up and come with their own sets of advantages and disadvantages, and so you will need to discuss the option with a professional first.

Are you in the process of being made bankrupt by Court order? Call us straight away for confidential and obligation-free advice. We will be able to inform you of the process and the consequences of what you are about to go through, and if you do have the option of halting the Bankruptcy proceedings with some other form of arrangement, we will be able to assist you with this.

Call the Australian Bankruptcy Service today on 1800 462 767 if you want to try and avoid being made bankrupt by a court order.