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Bankruptcy

We believe that bankruptcy is the last resort and SV Partners will work with you to find alternative solutions to your financial problems.

However, in the event that you are no longer able to pay all your debts, you voluntarily declare bankruptcy (also known as a Debtor’s Petition) or a creditor makes an application to the courts to make you bankrupt (also known as a Creditor’s Petition), SV Partners can help you.

Bankruptcy is a legal process that provides protection to people who are unable to repay their debts or reach a suitable arrangement with their creditors. Although it is important to know your options and consequences before becoming bankrupt, bankruptcy may be the most suitable avenue that allows you to be released from most debts.

Once the act of bankruptcy has occurred, there are obligations and restrictions imposed on that individual.

 

What causes Bankruptcy?

  • A situation where an individual is unable to pay all their debts
  • A situation where an individual receives letters of demand, writs and/or bankruptcy notices from creditors, debt collectors or solicitors
  • An individual chooses to make themselves bankrupt with debts of at least $5,000 and a connection with Australia
  • An individual’s personal guarantees provided for company debts are called up
  • A creditor applies to the court to make an individual bankrupt if they can prove that the individual has at least $5,000 in debt and that a bankruptcy notice has expired
  • When a creditor is experiencing non-payment of a debt, dishonoured cheques or payments, trading terms extended or not met by the individual
  • When a creditor has sufficient reason to believe that the debtor is disposing or transferring property prior to their bankruptcy

 

What are the expected outcomes of bankruptcy?

  • A Registered Trustee (such as SV Partners) is appointed and manages your bankruptcy
  • The Trustee recovers and sells your assets for the benefit of the creditors and investigates your financial affairs
  • Relief is provided to the individual in bankruptcy from debt problems and extinguishes existing debts
  • Relief from creditor demands
  • The ability for the individual to start life afresh after bankruptcy, being free from debt

How to declare Bankruptcy

Before applying for bankruptcy there are 2 eligibility criterions that need to be met. These are that the individual cannot pay their debts when they are due and you are present in Australia with a residential or business address. If a person is making an application for bankruptcy, there is no eligibility criteria on income or debt amounts.

It is recommended that if you are considering applying for bankruptcy that you speak to a qualified professional. As there are serious consequences of bankruptcy, this may be the last resort.

To declare bankruptcy, the individual needs to complete an application form (Bankruptcy Form). You can do this with the Australian Financial Security Authority (AFSA) using their portal or if you have arranged for a Trustee (such as SV Partners) to assist you we will help you through the process and you will need to complete a Consent to Act Declaration with your Bankruptcy Form. By engaging with a Trustee (such as SV Partners) we will do this for you on your behalf. These forms will be lodged with AFSA.

AFSA then reviews each application and advises if your bankruptcy application has been approved or not.

How long does Bankruptcy last?

Normally bankruptcy lasts for 3 years and 1 day. As bankruptcy can have serious consequences, it is important to know your options and seek professional advice first before declaring bankruptcy.

Throughout the bankruptcy term, there are obligations and responsibilities that a bankrupt needs to abide by.

There are instances whereby your bankruptcy can be extended from the normal 3 years and 1 day to a term of up to 8 years. In these instances, your Trustee will have lodged an ‘objection to discharge’ on the basis that you have not complied with your obligations during your bankruptcy. These may be failures to:

  • Provide information to the Trustee and disclosed all your income
  • Made your compulsory payments to the Trustee if applicable
  • Explain your expenditures
  • Be forthcoming and disclosed all assets and debts

It is important to remember your obligations as a bankrupt as failure to do so may incur a prolonged bankruptcy term.

How long does bankruptcy stay on file in Australia?

Once an individual enters bankruptcy, 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 at just a small financial cost.

Personal information is recorded along with the bankrupt’s name on the listing. This includes:

  • Date of birth and residential address
  • Occupation
  • Any other names that you may have been previously been known by
  • The details of the bankruptcy administration and Trustee contact information
  • The current status of the bankruptcy (discharged or current)

Along with a permanent record of the bankruptcy on the NPII, a bankrupt’s credit file with the appropriate credit bureau has the details of the bankruptcy on record. 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 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. Their name and date of birth will always remain however on the NPII. Residential addresses may be removed upon application in situations whereby the bankrupt is on witness protection or victim of domestic violence.

What are the consequences of Bankruptcy in Australia?

Although bankruptcy is formal and legal process to relieve someone of their unmanageable debts, it is vital to understand that there are consequences for filing for bankruptcy. Once bankruptcy is filed and a Trustee is appointed, they become the sole controller and manager of the Bankrupt’s finances. This is so that creditors and debts are fairly managed and paid in order to achieve the best possible result under the circumstances.

Consequences relating to bankruptcy include:

  • Selling off assets to pay off debts
  • A bankrupt must be willing and is obligated to provide all information to the Trustee relating to changes of circumstances, such as employment, income, business statements
  • May need to make compulsory income contributions if the bankrupt exceeds income limits
  • All debts may not be ‘cleared’ under your bankruptcy
  • Impacts to your credit file that may impact future financial decisions such as loan applications
  • Permanent listing on the National Personal Insolvency Index (NPII)

The Trustee may need to sell off assets in order to recover funds to pay off creditors. With the Trustee being appointed, the Bankrupt has legal obligations that include the disclosure of any change in circumstances that relate or may impact the situation or bankruptcy. This includes providing information such as bank statements, files and other records that the Trustee may request of you.

In addition, entering bankruptcy may also have an effect on your income, employment and business. Earning over a certain amount of income may mean that you will need to make compulsory payments to your Trustee. If you lose or job, have a change of employment or there is a change of income, these circumstances must be communicated back to the Trustee.

Unfortunately, entering bankruptcy does not necessarily mean that all debts are cleared or you are exempt from all debts. There are exclusions to the debt relief that someone may seek under bankruptcy, this includes; court penalties or fines, child support, Government student loans, debts that are incurred after the bankruptcy begins and debts that are undecided between the bankrupt and the creditor (also known as unliquidated debts).

There are also secured debts (or debts that are tied to assets) that need to be managed. This includes instances such as a mortgage over a house, the secured creditor (commonly a bank that has issued the mortgage loan) has the security over the house. If a bankrupt is not making the repayments, the secured creditor has the right to take possession of that property they have the security over. As a consequence, being a bankrupt, you do need to comply and be of assistance to the secured creditor during this asset recovery.

There are also different types of debt including joint debts, company debts and overseas debts, all of which are treated individually. It is important and your obligation to disclose all debts and all creditors as part of your bankruptcy to your Trustee.

For more information on the consequences of bankruptcy in Australia, contact one of our professionals.

How can SV Partners help?

If you are in the situation where you may be facing bankruptcy, SV Partners can help you. We will assess your situation and talk you through your options.

Our role is to help provide objective and practical solutions tailored to your situation to provide relief from debt and financial pressures.

We are experts in all facets of bankruptcy and our approachable team make every effort to make the bankruptcy process as transparent and manageable as possible. Visit our FAQ section for more information. To have an obligation free consultation with a bankruptcy expert, contact our confidential assist line on 1800 246 801.

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