Bankruptcy – Why me?

In most peoples’ minds, Bankruptcy conjures up images of financial ruin and oblivion.  The laws of bankruptcy where not legislated for such a purpose.  In fact those very laws where designed to give those persons who, through choice or compulsion, go bankrupt, an opportunity to “clear the slate” and start over. Whether you like it or not, Bankruptcy, does have a social stigma.

The objectives of bankruptcy include the following:

1. The distribution of the bankrupt’s property to creditors;
2. Relief to the bankrupt from the burden of paying creditors’ debts and providing an opportunity for a fresh start;
3. To ensure an independent investigation is undertaken into the bankrupt’s dealings, transaction, property and affairs. This investigation should identify the causes of bankruptcy and any improper conduct;
4. To act in the public interest by preventing a reckless bankrupt from continuing to trade.

Sometimes people go to extraordinary lengths to avoid bankruptcy and if it can be avoided by making arrangements with creditors to repay debt by a structured arrangement which does not cost an arm and a leg to facilitate, then that is a preferable option.

The downside of going bankrupt is the fact that you remain a bankrupt for a minimum of 3 years and maybe longer if any objection filed opposing your discharge is accepted by your Trustee.

There are numerous debt restructuring companies out there who make money from trying to facility for you to re-structure you creditor arrangements.  If you need additional advice in relation to your options when faced with debts that appear overwhelming consult a specialist solicitor who will give you impartial advice as you are paying for that advice.

Bankruptcy is administered under the Federal Bankruptcy Act 1966.

For a person to be made bankrupt, a creditor must first serve a Bankruptcy Notice which is based upon the allegation that the person has committed what is called “an act of bankruptcy”.  The debtor has a right to satisfy the Bankruptcy Notice within a certain period of time by payment of the debt claimed.  If the debtor fails to do so, the creditor is entitle to file a Creditor’s Petition for the issue of a Sequestration Order which is the order which commences the bankruptcy.

The Bankruptcy Notice is issued by the Official Receiver in Bankruptcy on the application of a creditor.  Without setting out what these are in detail, suffice to say they are actions which are designed to defeat or delay claims by your creditors against any assets you may have.

You can bankrupt yourself if you choose by the filing of a Debtors Petition. Before, filing a Debtor’s Petition a debtor can present a declaration of an intention to present a Debtor’s Petition, but cannot do so if a Creditor’s Petition has already been presented against the debtor.

Once you are made bankrupt all proceedings against you to recover debts issued by creditors cease.

The effect of the Official Receiver accepting the declaration is to freeze enforcement of debts by creditors during the stay period which is 21 days commencing from acceptance of the declaration.

There are a number of ways to come to terms with your creditors if you do get into trouble.  These are:

1. Personal Insolvency Agreements under Part X of the Bankruptcy Act. This process is to sanction arrangements between a debtor and his or her creditors.
2. Debt Agreement. This is a binding agreement between a debtor and their creditors where creditors agree to accept a sum of money which the debtor can afford.

Both of the above agreements occur outside the bankruptcy process and protect the debtor from the stigma and regulation of Bankruptcy.  However, under a personal Insolvency Agreement the debtor musty put his affairs in the hands of a Controlling Trustee, who makes the arrangements.

Before venturing down the Bankruptcy path get legal advice so you have the opportunity of making an informed decision about your financial future which will also include your whole family and do not leave it too long before doing so.  The sooner your financial problems are dealt with the less painful the solution will be.

It’s not just you it can happen to anyone, so act early.

This article is for general information only, and is not intended as legal advice. If you need specific help please contact our office.