What is bankruptcy?

We have included some information here about bankruptcy. This is general information only and does not constitute us providing you with legal advice. If you would like us to advise you regarding bankruptcy or you still have enquiries, we recommend contacting us at the earliest convenience.

In short, bankruptcy is a legal process where you’re declared unable to pay your debts and are released from most of your debts. You can commonly become bankrupt voluntarily by filing a debtors petition with the Australian Financial Security Authority (AFSA), or by way of a court order on petition by a creditor in the Federal Circuit Court of Australia.
Pursuant to section 5(2) of the Bankruptcy Act 1996 (Cth), a person is solvent if, and only if, the person is able to pay all the person’s debts as and when they become due and payable. Pursuant to s 5(3) of that Act, a person who is not solvent is insolvent.
There are a number of circumstances listed in section 40 of that Act which specify when a person will have committed an Act of Bankruptcy.
The person in question is called the debtor. The person to whom money is owed is called the creditor.
Amongst other ways, a debtor will be taken to have committed an act of bankruptcy if:

(a) The debtor has been served with a bankruptcy notice and had failed to comply with the requirements of the notice within the specified amount of time.
(b) The debtor presents a debtors petition with AFSA.
(c) A debt agreement proposal is accepted by the Official Receiver (AFSA).
(d) The debtor enters into a Part X (1) agreement, known as a personal insolvency agreement, with their creditors.
Depending in the manner in-which a person goes about becoming a bankrupt, there may be different repercussions, obligations and rights. If you are considering going bankrupt, or are unsure about where you stand, we recommend you obtain advice about your options. We would be happy to receive your enquiry so we can provide you tailored information or advice on your options.
Otherwise, we encourage you to continue researching on our website to see whether you can find an answer to your enquiry.

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