Personal insolvency/bankruptcy frequently asked questions
What is Bankruptcy and why would you choose to become Bankrupt?
Bankruptcy occurs when an individual is insolvent (unable to pay their debts as and when they fall due) and has a trustee appointed to control their assets and finance. Bankruptcy affords protection to both debtors and creditors as the bankrupt is protected from being pursued by most creditors (secured creditors are entitled to continue taking action) and they are released from most debts.
Bankruptcy protects the interests of creditors by having an independent person (a Registered Trustee) appointed to investigate the bankrupt’s financial affairs. If sufficient funds are recovered a dividend will be paid to creditors of the estate. While the bankrupt is, by appointing a trustee, protected from any further legal action being brought by their creditors (certain creditors excluded).
Having a trustee appointed also protects creditor’s interests by removing control of assets and finances from the bankrupt and into the hands of the trustee, who is then tasked to investigate the bankrupt’s affairs and manage the collection and distribution of assets to the creditors.
If you are considering voluntarily declaring yourself bankrupt, been made a bankrupt or facing a bankruptcy notice, be sure to seek advice from Macmillan. Claim your free consultation today.
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How does someone become Bankrupt?
If a person is unable to pay their debts or come to an arrangement with their creditors for the payment of their debts, then they can choose to make themselves bankrupt by lodging a Debtor’s Petition and a Statement of Affairs either with the Official Receiver or a Registered Trustee. Generally, they must have debts of at least $5,000 and a connection with Australia. The most common causes of bankruptcy occur when:
- An individual is unable to pay all debts
- Personal guarantees provided for company debts are called up
- An individual receives letters of demand, writs and/or bankruptcy notices from creditors, debt collectors or solicitors
Alternatively, a person can be made bankrupt by a creditor lodging an application (Creditors Petition) with the Federal Court to have the debtor declared bankrupt. Creditors can apply to Court to make someone bankrupt if:
- The person owes them debts of at least $5,000 and that a bankruptcy notice has expired.
- They haven’t received payment for their debt
- There are dishonoured cheques or payments
- Trading terms extended or agreed are not met by the individual (debtor)
If you are considering voluntarily declaring yourself bankrupt be sure to seek advice from Macmillan. Claim your free consultation today.
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How can I make myself bankrupt?
If you:
- cannot pay your debts when they are due and payable; and
- you are present in Australia with a residential or business address;
then you are able to declare yourself bankrupt no matter your income or total amount of debts you have.
If you are thinking of making an application to become a bankrupt, it is generally recommended that you speak to a qualified professional such as an insolvency lawyer or accountant. As there are serious consequences of making yourself a bankrupt which cannot be undone and there may be other options available – this may be the last resort but the first solution you think of.
To declare yourself bankrupt, you must complete an application form (Bankruptcy Form).
You can do this by yourself by accessing the portal on the AFSA website or we can assist you and help you through the process.
AFSA then reviews each application and advises if your bankruptcy application has been approved or not.
If you are considering voluntarily declaring yourself bankrupt be sure to seek advice from Macmillan. Claim your free consultation today.
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How long does bankruptcy last?
Typically, the term of bankruptcy is 3 years and 1 day from the date the bankrupt submits their statement of affairs to their trustee. However, there are exceptions which would allow the trustee to lodge an objection to automatic discharge and extend the bankruptcy.
This typically occurs where a bankrupt fails to submit documents, answer questions or otherwise cooperate with the trustee.
If you are considering voluntarily declaring yourself bankrupt, been made a bankrupt or facing a bankruptcy notice be sure to seek advice from Macmillan. Claim your free consultation today.
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How long does bankruptcy stay on my file?
Once someone becomes a bankrupt, their name and other personal details are listed permanently on a public register known as the National Personal Insolvency Index (or NPII).
This record is permanent and can be accessed by anyone upon a search of the index for a fee.
Personal information included on the listing includes:
- Name
- Date of birth
- Residential address
- Occupation
- Any other names or alias’ you may be known by
- The details of the administration and the Trustee’s contact information
- The status of the bankruptcy (discharged or current)
In specific circumstances where a bankrupt has a genuine safety concern of their residential address being listed on the NPII, they may make an application to remove this detail. However, their name and date of birth will always remain.
Along with the permanent record on the NPII, credit bureaus will have the details of the bankruptcy on record and this remains on file for 5 years from when the person become bankrupt or 2 years from when the bankruptcy ends (whichever is later).
If you are considering voluntarily declaring yourself bankrupt, been made a bankrupt or facing a bankruptcy notice be sure to seek advice from Macmillan. Claim your free consultation today.
