Bankruptcy, in plain terms occurs when an individual cannot repay their debts and there is no foreseeable change in their circumstances that would allow them to repay their debts in the future. There are three relevant options available to individuals under the Bankruptcy Act 1996 (the Act). Firstly, a person can voluntarily declare bankruptcy, they can enter into a debt agreement with their creditors or enter into a personal insolvency agreement. These three different options available under the Act are tailored for individuals in different circumstances.
When a person is declared bankrupt (the Bankrupt) they must appoint a trustee or in some circumstances a trustee is appointed for them. The role of the trustee is to administer and manage the bankrupt’s estate. The trustee will look for assets in the bankrupt’s name to sell in order to pay off the bankrupt’s creditors.
Voluntary Bankruptcy
Voluntary bankruptcy is the most common type of bankruptcy in Australia. Generally, voluntary bankruptcy occurs when an individual voluntarily declares to be bankrupt. This type is typically recommended for people who cannot repay their debts and no other means to resolve their financially difficulties are available to them. For example, they aren’t earning an income and therefore are unable to repay their debts, and their circumstances are unlikely to change. Bankruptcy lasts for at least 3 years and 1 day. At the end of this period the bankrupt is released from their debts. Some debts, like child maintenance survives bankruptcy.
Debt Agreement
Alternatively, individuals who are earning an income can enter into a formal debt agreement with their creditors, this would allow the bankrupt to repay their creditors periodically over time. With a debt agreement, you can negotiate with your creditors to pay a percentage of your debt and make subsequent repayments. Debt agreements typically last for up to three years. This option under the Act is especially beneficial to creditors as they would receive more money than if you were to declare bankruptcy.
Personal Insolvency Agreement
The final option available under the Act is to enter in a personal insolvency agreement. This option is tailored for individuals who have a regular income, but do not make enough money to repay their creditors in full. Through this agreement, the individual can repay their debts over time, typically with reduced payments. A personal insolvency agreement involves appointing a trustee who will take control of the insolvent individual’s property and negotiate with their creditors. A personal insolvency agreement lasts until the trustee has made the final payments to the insolvent individual’s creditors.
How RCR can assist
RCR specialises in bankruptcy and insolvency matters, offering expert guidance throughout the entire bankruptcy process. Our services include:
- Advising on the implications of bankruptcy: We provide clear insights into how bankruptcy may affect your financial situation and whether it is the appropriate choice.
- Assisting with preparation and submission: We help you prepare and submit necessary paperwork such as bankruptcy forms or creditor’s petitions.
- Representation in court proceedings: Our team represents clients in court for various bankruptcy-related matters, including creditor’s petitions and review hearings.
- Providing ongoing support: We offer continuous support throughout the bankruptcy period, including communication with trustees and management of obligations.
If you are facing financial difficulties and considering bankruptcy as an option, RCR’s experienced team of bankruptcy lawyers in Brisbane and Sydney are here to help you make the right decision. Contact us today to schedule a consultation and take the first step towards managing your debt and financial future effectively.
The blog published by Rostron Carlyle Rojas is intended as general information only and is not legal advice on any subject matter. By viewing the blog posts, the reader understands there is no solicitor-client relationship between the reader and the blog published. The blog should not be used as a substitute for legal advice from a legal practitioner, and readers are urged to consult RCR on any legal queries concerning a specific situation.
