Corporate Insolvency & Bankruptcy Lawyers Brisbane

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Bankruptcy

Bankruptcy is a legal process that allows people who can’t repay their debts to give control of their money to someone else. They do this because they can’t afford to pay back all of the money they owe. The third-party who assumes control of the debtor’s financial affairs is either an appropriately licensed trustee or the Official Receiver, appointed either by the Federal Court or the Australian Financial Security Authority (AFSA).

What is the process for declaring bankruptcy?

A party may go bankrupt in one of two ways:

Bankruptcy by Debtor’s Petition: the person who is in financial difficulty voluntarily lodges a petition (that is, an application on a particular form) to the Official Receiver for their own bankruptcy. The petition is the debtor’s way of seeking relief from unmanageable debt through bankruptcy. 

Bankruptcy by Creditor’s Petition: if a creditor is owed $10,000.00 or more they may be able to apply to the Court to have the debtor made bankrupt. A creditor needs to prove that the debtor has committed an ‘act of bankruptcy’ within the six months prior to the application. The creditor must file a creditor’s petition in the Federal Court seeking an order that the debtor be declared bankrupt (a sequestration order) which makes the person bankrupt.

How long does bankruptcy last?

After the day on which a debtor’s petition is accepted by the Official Receiver, a person remains bankrupt for three years. The three-year period of bankruptcy commences after the Statement of Affairs is submitted to AFSA in the case of bankruptcy caused by the issuing of a sequestration order. Please note there may be different effects based on your individual insolvency matters that vary between voluntary administration, company arrangement, or court orders so we recommend speaking with an insolvency law expert to confirm how each solution could affect you.

What are the effects of bankruptcy?

When you are made bankrupt, certain restrictions and obligations are placed on you. These are called the ‘effects of bankruptcy’. The main effect is that your property vests in a trustee who then administers it for the benefit of your creditors. This includes any real estate you own (other than your principal place of residence), motor vehicles (excluding property used primarily for transport), shares, cash that the bankrupt holds in-person and other valuables.

These restrictions are designed to protect your creditors by ensuring that you cannot act in a way that is unfair to them. 

Declaring bankruptcy, or even contemplating it, is a daunting and stressful experience to be in. It might be difficult to navigate all of the various elements involved in a bankruptcy proceeding.