Bankruptcy & Insolvency Law
Things you should know
- Having temporary cash flow difficulties and being insolvent are two completely different things.
- More than 80% of bankruptcies arise from personal debts, while the rest are business related.
- Contrary to popular myth, the family home is not exempt from sale by a bankruptcy trustee.
- If you own a home or you are part owner, then the bankruptcy trustee can decide to sell it. The proceeds from the sale can be used by the trustee to repay the money you own.
- Becoming bankrupt will generally not prevent you from working (there are some exceptions, mainly in professional service occupations), but it may affect your income and employment.
- The best approach to avoiding bankruptcy is getting advice from a professional before accumulating unserviceable debt.
- Debts can accumulate over time and sometimes, they may get to a point where it’s practically impossible for you to repay. That’s why it’s important to discuss with a professional immediately if you have been served with a Bankruptcy Notice so you can receive the best advice before making a decision.
- More info on the Australian Bankruptcy Act 1966.
The Mulally Mylott Difference:
- We have a broad spectrum of experience and expertise including insolvency, debt recovery, legal costs, business matters and employment law.
- We make sure to keep on top of changes in the law, such as the recent and significant changes to corporate insolvency (company bankruptcies) and personal bankruptcies.
- Most importantly, we focus on working with each client to define and achieve a positive result.
Why would you need this service?
Stating the obvious, the result of having too much debt and being unable to repay it is called bankruptcy. But, legally speaking, a trustee will be appointed to that bankrupt person to administer all the affairs related to bankruptcy.
Even if you have debts, you don’t necessarily need to be alarmed. It is not uncommon for someone to be late when making a loan repayment or paying a bill, which doesn’t make the person bankrupt.
Bankruptcy initiate in two ways:
- Self-initiated. When you accumulate so much debt you realise it’s impossible to repay it; then you can make yourself bankrupt through a process called the “debtors petition”. Often an extensive period of unemployment combined with a large number of debts (commonly due to the use of multiple credit cards), can cause a self-initiated bankruptcy.
- Creditor-initiated. If you have a debt of $5000 or more, a creditor may serve you with a bankruptcy notice which will require a response within 21 days. After 21 days, the creditor can also make an application for “creditors’ petition” in a Federal Court. If the application adheres to the legal requirements, the court will make a sequestration order. The sequestration order is a common outcome if a person doesn’t comply with the bankruptcy notice.
There are a few critical consequences which may affect you if you decide to go bankrupt. That’s why it’s crucial to be aware of them so you can make the best decision possible.
It lasts typically three years
First, bankruptcy generally lasts three years from the moment you file a Statement of Affairs with the trustee in bankruptcy. If it followed a sequestration order (that is, creditor-initiated). Otherwise, if it’s self-initiated, the date is calculated from the day the application is accepted.
Second, the appointed trustee, aside from managing your affairs, will also be able to sell your assets (with a few exceptions) including your home. He or she will also decide whether you are permitted to travel overseas.
Lastly, bankruptcy doesn’t cover all debts. Which means you will remain liable for court-imposed penalties and fines, government student loans, unliquidated obligations, child support and maintenance, and liabilities accumulated after your bankruptcy begins.
Whether you need assistance before or during bankruptcy, we’re here to help.