Bankruptcy
Lawyers & Barristers

Unsecured creditors are usually unable to take further legal action, and existing legal action from unsecured creditors will usually come to an end. Communication about debts will take place between the creditors and the bankruptcy trustee; no need to deal with pressure from creditors who are harassing you.

You are allowed to keep some protected property such as essential household goods and a cheap motor vehicle for example. Income can often still be earned during bankruptcy depending on how much you earn, your number of dependents, and so forth. A number of superannuation, life assurance, and compensation payments for personal injuries are protected from creditor claims.

Most debts will be cleared when discharged from bankruptcy (which is usually 3 years after bankruptcy takes effect).

Most valuable property is lost during bankruptcy.

Bankruptcy generally lasts 3 years, and may be extended by a further 5 years in some circumstances. Bankruptcy remains on your credit report for at least 7 years. Bankruptcy is noted on a permanent record which can be accessed by anyone for a fee.

Your passport may need to be handed over and travel outside of Australia is not permitted without the permission of the bankruptcy trustee. Bankruptcy trustees can investigate past dealings and can in some cases recover property, transfer funds, or cancel transactions you have made up to 5 years from when you were made bankrupt.

It is difficult to obtain credit for at least a period of time after bankruptcy, if not forever. Certain types of employment cannot be obtained after being made bankrupt and restrictions may apply even after bankruptcy.

Penalties and fines imposed by a Court, damages from certain accidents, and loans to the government (such as HELP debts) must continue to be paid when discharged from bankruptcy.

1. Apply for a bankruptcy notice - A bankruptcy notice is a formal notice of demand issued by the Official receiver which requires a debtor to pay their debt. A bankruptcy notice must usually be based on a final judgment or order.
2. Serve a creditor’s petition - A creditor’s petition is an application requesting the appropriate Court to make a debtor bankrupt. Once the application is filed with the Court, it must be served on the debtor.
3. Obtain a sequestration order (involuntary bankruptcy) - If a creditor can demonstrate that an act of bankruptcy was committed in the last 6 months, that it is owed more than $5,000, and that the creditor’s petition was served, the Court may make a sequestration order which formally declares a person bankrupt. A person who is the subject of a sequestration order must within 14 days of being notified of the order complete a Statement of Affairs form and lodge it with the appointed bankruptcy trustee.

If you receive a Bankruptcy Notice, you should seek legal advice immediately to see what options you have. You may have grounds to apply to a Court to set aside a bankruptcy notice or to dispute the bankruptcy notice. However, unless the right action is taken, you will only have 21 days to either pay the amount shown on the bankruptcy notice or to have negotiated a repayment plan with the creditor. Failing to do so may result in you committing an act of bankruptcy which enables a creditor to make you bankrupt.

A Creditor’s Petition is very serious, so you should seek legal advice immediately.

It is very likely that a court date will be set within a few days upon receiving the creditor’s petition if it is not already specified in the creditor’s petition.

Creditor’s petitions can be opposed or set aside in limited circumstances.

Bankruptcy is regulated by the Bankruptcy Act.

1. A trustee will be appointed to administer your existing assets. A trustee’s job is to pay out all creditors to the best of their ability.
2. The trustee will compile a list of all your creditors, debts, assets and income.
3. Certain assets will be sold.
4. The trustee usually has power to sell assets apart from any houses you own. If you have a house, creditors with a special interest over the house (such as your bank) will deal with you individually to try to recover their debts.
5. The pool of money raised from the sale of the assets will be spread across creditors to pay off your debts.
6. Generally, the bankruptcy will last for about 3 years. This time period however may be extended if the court thinks it’s necessary.

Assets are anything you own with value. They will be sold to pay off your debts, but the law also allows you to retain certain assets. They are:

1. Most ordinary household items.
2. Tools you use in your trade, to certain value.
3. Certain vehicles.
4. Life insurance policies for yourself or your spouse.
5. Assets you hold on trust for a third party beneficiary.

Consult a lawyer to work out which assets you can retain. Assets which you have given away or sold prior to the bankruptcy can be recovered by the trustee.