Bankruptcy

What is bankruptcy?

If you are unable to pay your debts and cannot come to suitable repayment arrangements with your creditors, this is what Bankruptcy is. In Australia, bankruptcy generally refers to a state of insolvency of a individual and not a company, although informally. Obviously in the times of the global financial crisis and a generally tough economy. The incidence of personal bankruptcy is on the rise and you would certainly not be alone if you are considering personal bankruptcy as an option going forward. In the United States, in the last two years the incidents of filing for personal bankruptcy have reached levels not seen since the great depression in the nineteen thirties. In Australia, the official statistics are yet to be released but anecdotally, professionals in the bankruptcy area tells us that bankruptcy is becoming an alternative for more and more people.

What is the key law surrounding bankruptcy?

The essential law surrounding bankruptcy in Australia is the Bankruptcy Act 1966 (Cth), this was the first set of statutorily prescribed principles in Australia for dealing the event of a bankruptcy in some one’s life. Essentially, when someone commits and ‘act of bankruptcy’ under section 40 of the act this is the point at which they are determined to have become bankrupt as an objective test under the law. Acts which can include an act of bankruptcy include, but is not limited to, if they make a conveyance of their property whilst they have creditors, if they create a charge over their property, or give security over their property, if they make a payment or incur an obligation then they are committing an act of bankruptcy. This concept is the key to understanding how the law of bankruptcy works in Australia.

What courts hear bankruptcy applications?

If you are a creditor and you are seeking to enforce a bankruptcy against someone, you will be most likely to file your application in Federal Magistrates Court or the Federal Court as it is soon to be know. This is because Bankruptcy is under federal jurisdiction in Australia and not in the hands of the state courts. If you are a creditor, and you have an existing judgment debt against the debtor you can, within one year file a bankruptcy notice at the Insolvency Trustee Service of Australia. You can then within six months file a creditor’s petition and then seek a sequestration order against the defendant. At the first hearing of the matter which is usually about three months from the date of the creditor’s petition been filed. Once a sequestration order is given, this means that the bankrupt person’s financial affairs are now in the control of the Trustee in Bankruptcy. The trustees are overseen and managed by the Insolvency Trustee Service in Australia.

If you have been served with a creditor’s petition and a bankruptcy notice, you should seek legal advice immediately about what to do and we have lawyers online now available to answer your questions. If you have a judgment debt against someone and you need to enforce it you also need legal advice on this as it a very complex process.

Debt Collection Letter Resources

• Guide to Filing a Creditor's Petition and other bankruptcy matters A brief guide to filing a creditor's petition in the case where you are a creditor. This is when you need to make somone bankrupt and you need a sequestration order.
• S.73 Composition in Bankruptcy What is a S.73 Composition in Bankruptcy? How can it help me? What do I need to do to get a s.73 composition in bankruptcy?