Bankruptcy, is it really the best option for you?
If you are thinking about declaring yourself bankrupt there are a few things you should consider first.
What is bankruptcy?
Bankruptcy is a process where an entity declares they are unable to repay their debts.
The Bankruptcy Act 1966 stipulates the process and requirements to be met in order to declare yourself bankrupt.
There are 2 ways bankruptcy can occur; either :
- voluntarily by completing the required paperwork yourself, or
- Involuntarily by Order of the Court.
The latter process is usually provoked by a creditor (person to whom you owe money ) if the amount owed is $2,000 or more.
You must be an Australian Citizen in order to declare bankruptcy.
After declaring yourself bankrupt, a trustee will be appointed to look after your case and will attend to payment of your creditors. The trustee has the power to sell some of your assets and investigate your financial affairs.
Any creditors claiming against your estate, will be notified that you are now bankrupt and instructed to stop pursing you for monies owed to them. .
There are penalties if you do not disclose all of your assets on the required paperwork or if you do not disclose any assets you accumulate during bankruptcy.
Is bankruptcy the best choice for me?
You should really only consider declaring bankruptcy once you have exhausted all other options .
Bankruptcy usually lasts for 3 years but may be extended to 5 or 8 years
The effects of declaring bankruptcy are: :-
- Your details are recorded on a government database known as the National Personal Insolvency Index (NPII). Banks and creditors usually consult this system before any loans or credit cards are approved.
- You will be unable to travel overseas except for employment purposes or a personal emergency.
- You will be unable to become a director of a company without approval.
- You may be barred from some vocations e.g. police officer or security guard.
- You will have difficulty obtaining licences including but not limited to, liquor, tax agent, real estate, financial, and a builder’s licence.
- Fines and Penalties are still required to be paid.
- Child and other maintenance payments are still required to be paid.
- Centrelink overpayments and HECS payments are still required to be paid
- Despite coming out from bankruptcy, the term ‘bankrupt’ will still remain on your record that you have been a bankrupt.
- You must notify the trustee when any changes are made in relation to your assets and income.
If you still believe bankruptcy is the best option for you; ensure you follow the rules and guidelines associated and disclose any relevant information to the trustee.
Should you require any further information, assistance or advice on a commercial litigation matter or bankruptcy please do not hesitate to call Jody Huckstepp to arrange an appointment on 07 5506 8274 complete our online appointment request form.