The laws and processes governing bankruptcy differ country by country. In this article we will look at bankruptcy in Australia, look at the role of the trustee, and answer some of the more common questions about the obligations of the debtor.
What is Bankruptcy?
Bankruptcy is a legal status conveyed upon an individual when the court declares them unable to pay their creditors. A company cannot be declared bankrupt.
Bankruptcy law originated in England, was not voluntary and was designed to protect the creditor. The law allowed a creditor to seize control of a debtors assets as compensation for the debt owed. In those days a debtor was treated harshly and could be sent to prison. Today, the law governing bankruptcy in Australia is the Bankruptcy Act 1966 (Commonwealth) and is more lenient towards debtors.
For most people, bankruptcy occurs when they cannot meet their debts to creditors and are unable to come to an agreement. In this situation a person can declare themselves bankrupt by filing a petition to the court. This is called “voluntary bankruptcy”
Under certain conditions, a creditor can apply to the court via petition to have you declared bankrupt. The outstanding debt must exceed $2000 (in Australia). This is less common than the former situation.
The Bankruptcy Trustee
A bankruptcy trustee is normally appointed by the court to deal with the administration of the debtors estate. Once declared bankrupt, creditors will stop contacting the debtor in their attempts to reclaim funds. The trustee will advise creditors of the situation and will thereafter deal with all creditor inquiries. This includes such things as selling assets and distributing the proceeds to creditors.
Obligations of The Bankrupt
The bankrupt is required to meet certain obligations as deemed by the act. For example, they must provide the trustee with details of all assets that they own and all income they receive. They are also not allowed to leave the country unless their are extenuation circumstances and travel ia approved by the trustee. A death in the family is one such situation. If the requirements of the trustee are not adhered to, the trustee may apply to have the period of bankruptcy extended.
How Long Does The Process Last?
In Australia, bankruptcy typically lasts three years from the time a debtor provides the trustee with all necessary documentation. If there are transgressions, the trustee can apply for an extension to the term as mentioned above. The bankruptcy can be annulled if the debtor pays back all debts within the three year time frame.
For more information about the subject generally and bankruptcy Australia specifically, visit Wikipedia.
If you think that bankruptcy is a good option for your circumstances, you can ring us today to talk to our friendly consultants. They will be able to step you through the process and answer any of your questions. Call today on 1300 871 319.