How does bankruptcy work?





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Published on Dec 12, 2012

In some countries "bankruptcy" refers to the insolvency of a company, but here in Australia when we use the term "bankruptcy" we are referring to the insolvency of a single person.

If you are considering bankruptcy because you can no longer afford to pay your bills, it is important to understand how it works.
Firstly, the time that you are a bankrupt person is usually 3 years. Your Trustee in Bankruptcy can file an objection to your discharge and extend the time, but this is normally only done if you refuse to co-operate with their requests or you have incorrectly completed your Statement of Affairs.

You actually have two options when it comes to appointing a Trustee. You can appoint a Trustee of your choice, as long as they are registered with ITSA, or you can go directly to the government and allow the Official Trustee at ITSA to manage your bankruptcy. If you wish to appoint a private trustee you should give us a call, as we have a fully licenced and registered Trustee on site who can advise you first-hand as to the pros and cons of choosing your own Trustee.

After a Trustee in Bankruptcy has been appointed you will be issued with your bankruptcy number. This bankruptcy number will be registered on the National Personal Insolvency Index which is maintained by ITSA. You will also be required to complete and file a Statement of Affairs with ITSA, which is a form that outlines your financial position as at the date you went bankrupt. Once this form has been lodged with ITSA and accepted by them, the 3 year time period begins.

Your Bankruptcy Trustee will use the Statement of Affairs form as a starting point to assess your personal assets and liabilities, but they will also undertake their own investigations as well. These investigations usually start with searching public registers to establish if you currently own or have disposed of any property in recent years.
Your Trustee will also assess your income to establish if you will become liable for statutory income contributions, and decide if any of your assets should be sold for the benefit of your creditors.

After completing the initial investigations your Trustee in Bankruptcy will prepare and issue a report to your creditors and let them know if they expect to receive any funds from your bankruptcy which would go towards your debts.

If you are considering bankruptcy, call us today on our toll free line 1800 003 883 to see how it would affect your individual circumstances.


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