At Insolvency Guardian, we know that bankruptcy is something no one wants to go through. The terms itself carries negative ideas of poverty, failure and a stressful and uncertain financial future. Going bankrupt is often perceived as the end of times – no savings, house foreclosure, selling assets to make ends meet…the list goes on.
What you may not realise is that despite the negative implications, bankruptcy is often a necessary pathway towards rekindling the future of financial stability.
Bankruptcy – not the swear word you think it is
Bankruptcy is a legal process that people go through when it is clear they are unable to pay their debts. This could be because their income – or lack thereof – is not and will not be enough to settle ongoing debts.
Bankruptcy does not necessarily apply to every situation and is certainly not a ‘quick-and-easy’ solution to escape financial hardship. However, in many cases it can relieve some of your financial pressure and give you the breathing space needed to achieve a fresh start. If you feel like you’re being crushed under the constant weight of debt and it seems like there is not way out, then bankruptcy may be your lifeline.
Facing bankruptcy? You are not alone.
According to the Australian Financial Security Authority, 15,329 bankruptcies were recorded across Australia between 2018 and 2019. Queensland represented the largest total with 4,581 bankruptcies, followed by New South Wales (4,256) and Victoria (2,581).
Advantages of bankruptcy
- Creditors cannot continue to chase you for late payments
- With conditions, you can still earn an income
- Taxation debt is erased
- Unpaid unsecured debts will be written off at the end of the bankruptcy and wage garnishment will cease
Bankruptcy covers most unsecured debts including:
- Medical, legal & accounting fees
- Gas, electricity, phone and internet bills
- Credit and store cards
- Unsecured personal loans and pay day loans
- Overdrawn bank accounts and unpaid rent
Bankruptcy also covers (in some cases):
- Toll fines
- Centrelink debts
- Victims of crime debts
Disadvantages of bankruptcy
Unfortunately, declaring bankruptcy does not wipe the slate entirely clean. Bankruptcy does not cover all debts, including:
- Government student loans like HECS & HELP
- Debts you incur after your bankruptcy begins
- Court imposed penalties and fines
- Child support & maintenance
- Unliquidated (or yet-to-be-determined) debts
There are also a number of consequences that may affect your situation and your future. Bankruptcy can affect a range of things like travel, employment, credit and future assets. That is why it is important to consider the consequences of bankruptcy in relation to your financial situation.
Commencing the bankruptcy process
Bankruptcy, from beginning to end, is typically a three-year process and can begin when:
- You (the “debtor”) come to the conclusion that your debts are growing past the point where you are able to pay them. Self-realised bankruptcy begins upon the completion and submission of a Bankruptcy Form.
- A “Bankruptcy Notice” is issued by a creditor who is waiting for a debt to be settled and comes to the conclusion that you are unable to do so. Bankruptcy Notices contain deadline for debtors to either satisfy their debt or come to an arrangement with the creditor. a creditor may also file a creditor’s petition to the Federal Court.
Do you have everything you need?
Bankruptcy can be an arduous process. To minimise stress, it is important to be prepared with the following details:
- Income (such as employment, pension or Centrelink)
- Assets (such as car, real estate, etc)
- Bank details
Bankruptcy also requires the appointment of a trustee. You can nominate a registered trustee of your choosing, or be appointed a registered trustee from the Australian Financial Services Authority (AFSA).
Who is the trustee and what do they do?
A trustee is an individual responsible for managing your bankruptcy. The trustee will first notify your creditors that you’re bankrupt, preventing or at least minimising the calls and notifications you receive from creditors regarding outstanding debt. During the three-year period, the trustee will realise the value of your assets (excluding household items and work-related items like tools). Your trustee will then sell whatever is applicable and of value within your estate, distributing among creditors as necessary to pay off your debts. For example, creditors with the greatest amount owed to them will likely receive the highest proportion of any funds recovered from asset sales.
For more information on trustees and their role in bankruptcy, Insolvency Guardian has you covered. Click here to find out more.
Over the course of the three-year bankruptcy process, assets are sold, debts are gradually satisfied, finances are reviewed and monitored, and the uncertainty of your financial future will start becoming clearer.
Ending the bankruptcy process
Fortunately, bankruptcy is not a life-long affliction. The process typically lasts three years (unless your trustee lodges a written document that outlines the decision to extend the bankruptcy which in some cases can be up to eight years). If you’re interested in escape bankruptcy sooner, you may be able to seek annulment.
There are several ways to annul your bankruptcy:
Pay off all your debts
This would include all debts in full, as well as any interest or any fees and expenses incurred by the trustee.
Make an application to the courts
Depending on your situation, there may be grounds for you to claim that you should be bankrupt. This will of course require evidence and may require seperate legal advice and fees.
Lodge a formal ‘composition’ with creditors
In accordance with sections 73 and 74 of the Bankruptcy Act, you can make an offer to pay a percentage of your debts using money or assets that your trustee can’t claim, like a loan of good faith from a relative.
If you succeed by getting these numbers then you will have succeeded in having your bankruptcy annulled and you will be free from debt and your bankruptcy will be classed as “Void ab initio”, which means in legal terms “Void from the Outset or taken to never have happened”.
Insolvency Guardian offers our industry-leading bankruptcy help at truly affordable prices. We can resolve your debts with formal bankruptcy for as little as just $600. This low price includes completion of all paperwork on your behalf and full representation in negotiations with your creditors. Don’t wait another moment while your debt problems get worse. Don’t let the stress of debt collectors affect your business life or your family any longer.
Contact Insolvency Guardian for the most cost effective bankruptcy advice and support.