If you are in debt and are considering bankruptcy, knowing the bankruptcy laws will help you make the right decisions about your financial future.
You have rights and responsibilities if you go bankrupt. Think carefully before taking any action. Knowing how to claim bankruptcy is not as important as knowing when and how.
Does It Go To Court?
A bankruptcy case may be heard by the Federal Court or the Federal Circuit Court. Most bankruptcy cases are heard by the Federal Circuit Court. The rules, forms and procedures are the same in each court for bankruptcy cases.
How does the Court declare someone bankrupt?
A person who claims that you owe them money can ask the Federal Court or the Federal Circuit Court to declare you bankrupt. This person is called a creditor and their application is called a Creditor’s Petition. The creditor will give you a copy of the Creditor’s Petition which includes a time and date for you to attend court. To declare you bankrupt the creditor must prove to the Court that you have committed an act of bankruptcy.
The most common act of bankruptcy is failing to follow the instructions in a bankruptcy notice. This notice is issued by the Australian Financial Security Authority (AFSA) (formerly Insolvency and Trustee Service Australia) and then given to you by the creditor. The main instruction is that you pay the amount of a judgment debt within the time specified in the bankruptcy notice.
At the hearing the Court decides whether or not you have committed an act of bankruptcy.
At the hearing, your case may be heard by a Judge or a Registrar. If your case is heard by a Registrar you are entitled to ask that it be heard by a Judge.
You have three options:
- You agree to being made bankrupt.
- You do not agree to being made bankrupt and explain the reasons why.
- You might ask for an adjournment because you need more time.
If you agree to being made bankrupt
The most common reasons or grounds for not agreeing to being made bankrupt are that you:
- Did not commit the act of bankruptcy set out in the Creditor’s Petition
- Do not owe the money claimed by the creditor, or
- Are able to pay all your debts.
There may be other grounds as well.
There are several legal outcomes of your bankruptcy; for instance:
- You will be released from responsibility for most of your existing debts. However, the trustee can sell your assets or property to pay your creditors.
- Any house or your share of a house that you own may be sold to pay your creditors.
- Any assets which you acquire while you are bankrupt may be sold by the trustee.
- You must not obtain credit from another person, or pay for goods or services by cheque for more than a specified amount without telling the person that you are bankrupt. The credit limit is updated quarterly, for an up-to-date figure contact AFSA.
- If you run a business while you are bankrupt you must keep all proper accounts showing your business transactions and financial position.
There are other consequences of becoming bankrupt. For more information, contact AFSA.
There Is No Minimum Amount You Need To Owe Before You Can Go Bankrupt
You can become bankrupt voluntarily owing any amount.
A creditor cannot make you bankrupt unless the debt you owe is $5,000 or more.
Who Handles My Bankruptcy?
AFSA will administer your estate if no registered trustee has provided a consent to act. Capital Debt Solutions can arrange for a registered trustee and to act on your behalf.
More Information on this page: Declaring Bankruptcy
What Do I Do Now?
Your Debt Solutions specialist at Capital Debt Solutions will find the best solution and work with you and your creditors to get you back on track and rebuild your financial future.
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