What is Bankruptcy?

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What is Bankruptcy?

Bankruptcy is entered when a business, person, or other entity is incapable of repaying their debts.

Bankruptcy can:

  • Halt commencement of debt-related Legal Proceedings
  • Prevent creditors chasing you for late payments
  • Stop debt collectors from harassing you
  • Erase Taxation Debt
  • Stop ongoing Court Proceedings

Through the natural course of bankruptcy, a trustee will be appointed who can either be from the Australian Financial Services Authority (AFSA) or a private trustee who will, over three years, realise most of your assets excluding household items and tools of trade to a certain value.

You can also keep a car valued up to $7,200 or a car that has that amount of equity and may still be on finance.  Most of the time, if you have a vehicle and declare bankrupt then you can continue to pay for it as long as there is little or no equity and the payments are up to date.

The trustee will then sell whatever is available in the estate in order to distribute the assets among creditors, in a way that is proportionate to the debts owed by the bankrupt – i.e. the creditors with the greatest amount owed to them should receive the highest proportion of any funds recovered.

To end a Bankruptcy there are a few ways: let the bankruptcy finish after three years and become discharged from bankruptcy or you can have your bankruptcy annulled.  Annulment can be achieved in one of two ways: applying to the court to annul the bankruptcy or by making an offer pursuant to Section 73 of the Bankruptcy Act (Cth).

This is a composition or arrangement you propose to your creditors through your trustee and can be anything you want, however you might want to propose something your creditors are likely to accept.  You need to have 75% in value and 51% in number of the people who turn up to vote or vote by Proxy at the meeting or your proposal will fail.  Alternatively, if the provision of funds to the trustee is sufficient to pay out the debts and costs of the bankruptcy in full, the bankruptcy may be annulled.

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”.

There is no substitute for professional advice when you are thinking about declaring bankruptcy.  By proceeding any further by yourself you are risking your financial future.  That is not a risk you should have to take.  Visit our contact page today to begin your journey towards financial recovery.  We can help you to understand your rights and responsibilities today.  We will come up with the best possible debt strategy and then guide you through every step of the recovery process.  Don’t wait any longer, call us today!