If you are unable to service debts and can no longer afford to pay creditors, you may need to consider bankruptcy. Whether bankruptcy is the right option for you is not an easy decision to make. A bankruptcy solicitor can help you understand your rights and responsibilities in bankruptcy as well as the consequences that bankruptcy will have on your financial future will help you make the right decision.
A person may become bankrupt under the Bankruptcy Act in three of following ways:
• voluntary bankruptcy: the debtor files a debtor’s petition (approximately 90% of bankruptcies);
• forced bankruptcy: the creditor(s) files a creditor’s petition; or
• deceased bankruptcy: either the legal personal representative of the deceased or the creditor can petition for an order that treats the deceased person as a bankrupt.
The two purposes of bankruptcy are:
• to give the debtor a fresh start by wiping debts of the debtor; and
• to fairly distribute the debtor’s assets amongst creditors.
There are alternatives to bankruptcy that may be available to you. Although bankruptcy may seen to be an easy option to deal with your creditors, there are consequences to declaring yourself bankrupt. For example, there will be a permanent record of your bankruptcy on the National Personal Insolvency Index (the NPII), which is an electronic register of all personal insolvency proceedings. The NPII can be accessed by any person and will include some personal information about you, including your name, date of birth and address. In order to pay creditors, your trustee will:
• sell your assets, including those you acquire or become entitled to during your bankruptcy (although you will be able to keep certain types of assets)
• recover any income you earn over a certain limit
• investigate your financial affairs and may in certain circumstances recover property that you have transferred to someone else prior to your bankruptcy.
The alternatives to bankruptcy include:
• declaration of intention to present a debtor’s petition
• entering into a debt agreement
• entering a personal insolvency agreement
• making informal arrangements with creditors.
You need to take as much time as possible to fully understand all the alternative options available to you. You may also wish to consider whether disputing a debt is right for you and whether you have grounds to dispute a debt.
If you are considering declaring bankruptcy or have had a creditor’s petition filed against you, a Melbourne Lawyer at LGM Advisors is here to help you make the right decision about your financial future.
To speak to a bankruptcy lawyer in Melbourne contact us on +61 3 9832 0608 or alternatively by email email@example.com.