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What is bankruptcy?
Bankruptcy is a legal process where you’re declared unable to pay your debts (Australian Financial Security Authority). There are two ways an individual can become bankrupt: voluntary bankruptcy (debtor’s petition); and involuntary bankruptcy (creditor’s petition).
Voluntary bankruptcy is when you declare yourself bankrupt. If you’ve been unsuccessful in seeking an informal arrangement with your creditors or the amount owed to creditors is so insurmountable, you can file for bankruptcy.
Involuntary bankruptcy or a creditor’s petition is when you can’t pay your debts and a creditor applies to the court to have you made bankrupt.
What does the bankruptcy process involve?
At the beginning of this complex process, you’ll need to provide us with full details of your debts, income and assets. Acting as your registered bankruptcy trustee, we’ll then:
- Assist you to declare bankruptcy and notify your creditors
- Make appropriate investigations into your estate and financial affairs
- Determine the value of your estate
- Sell certain assets to help pay your debts
- Request compulsory payments (if your income exceeds a set amount)
Importantly, once your creditors have been notified of your bankruptcy, they can no longer contact you directly about your debt. We will communicate with your creditors on your behalf. Bankruptcy usually lasts for three years and one day.
What are the benefits of bankruptcy?
- No more harassment from creditors
- Any legal action against you relating to your debt will cease
- Exemptions may allow you to maintain ownership of your property
- Opportunity to start again with a clean slate