a person who is unable to pay their outstanding debts

Bankruptcy lawyers Australia

Bankruptcy is a legal process involving a person who is unable to pay their outstanding debts (that is, they have become “insolvent”).

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How does bankruptcy work?

Bankruptcy requires the person to relinquish control of their finances to a trustee.

The trustee’s role is to ensure the bankrupt’s assets are distributed appropriately to creditors.

Bankruptcy allows the person to start afresh by forgiving debts which cannot be paid and allows creditors a chance to recover some measure of payment.

In Australia, bankruptcy is governed by the Bankruptcy Act 1966 (Cth) (the Act) and is regulated by the Australian Financial Security Authority (AFSA).

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Bankruptcy Lawyers

How does a person become bankrupt?

There are only two ways a person can become bankrupt:

  1. debtor’s petition: the debtor voluntarily submits a petition and statement of affairs to AFSA to be declared bankrupt; or
  2. creditor’s petition: a creditor applies to the Federal Court for an order to declare the debtor bankrupt (a sequestration order).

Bankruptcy cannot be declared until a formal process is complete.

Once a sequestration order has been made, the debtor has 14 days to file a statement of affairs with AFSA. This statement sets out the debtor’s personal information, and assets and liabilities. The appointed bankruptcy trustee uses this information to begin administering the debtor’s financial affairs.

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The trustee will notify all known creditors that the debtor has been declared bankrupt, that a bankruptcy trustee has been appointed, and that the trustee is in the process of determining how best to deal with the debtor’s outstanding debts given the information they have, and their own investigations about the debtor’s assets and liabilities.

Bankruptcy will usually last three years and one day after the day the debtor’s petition is accepted.

In some cases, a trustee can apply to extend the bankruptcy for up to eight years.

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What to expect

Consequences of bankruptcy

Conditions are imposed on a bankrupt person, as well as the trustee. These include:

  • A trustee in bankruptcy: an applicant for voluntary bankruptcy can nominate a registered trustee. Otherwise, the  AFSA’s Official Trustee is generally appointed.
  • Bankruptcy and employment: if a person earns over an amount prescribed by AFSA, they may need to make compulsory payments. A trustee should be advised if the bankrupt person has a change in employment or income.
  • Debts: bankruptcy covers most secured and unsecured debts, but does not include court-imposed penalties, child support, and unliquidated debts.
  • Overseas travel: under the Act, a bankrupt person must have written consent from a trustee in order to travel overseas.

The implications of bankruptcy extend to a person’s ability to:

  • Obtain credit: a person’s bankruptcy status must be disclosed to lenders in some credit applications.
  • Be a company director: the Corporations Act 2001 (Cth) automatically disqualifies a person from being a company director or secretary, as well as from managing companies throughout their bankruptcy.
  • Pursue legal proceedings: unless there is permission from the trustee or a court, some legal proceedings involving the bankrupt person will be stayed (suspended).
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Your rights

Declaring assets

Once a person becomes bankrupt, they must declare all their assets. Strict penalties may apply if all assets are not declared.

Assets are either divisible (available to a trustee) or non-divisible. The trustee assumes control over all divisible assets.

Divisible assets include all property or property rights held at the time of bankruptcy or acquired during the bankruptcy.

Non-divisible assets generally include:

  • household property;
  • tools of trade used to earn income (subject to the value threshold);
  • a vehicle used as means of transport (subject to the value threshold);
  • property that has sentimental value; and
  • superannuation.
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Your team

Our bankruptcy team

Melany Dowse

SENIOR LITIGATION SOLICITOR

Rebekka Hallberg

Mitchell Caldwell

Litigation solicitor

Mitchell Caldwell

Special CounSEL

Melany Dowse

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Why us

Why choose Gibbs Wright Litigation Lawyers

Gibbs Wright’s bankruptcy lawyers have experience in personal insolvency matters. We can help deal with a bankruptcy notice, including challenging it. We can also provide advice and ensure you’re aware of your legal rights and obligations.

If you have been affected by bankruptcy, we are here to assist you anywhere in Australia from our base in Brisbane. Contact one of our experienced solicitors today.

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FAQs

Frequently Asked Questions

Does bankruptcy cover all debts?

Bankruptcy does not cover all debts.

If a debt is a secured debt tied to a particular asset (such as a mortgage or car loan) a creditor may take possession of the asset and sell it to recover all or part of the debt.

A creditor of an unsecured debt (such as a credit card or utility bill) does not have a right to pursue the asset directly.

A bankrupt person will still be liable to pay certain debts such as:
    •    student assistance or supplement loans;
    •    court-imposed fines and penalties;
    •    child support payments; and
    •    debts incurred through fraud.

Can I cancel my bankruptcy?

There are three ways in which you may be able to cancel or “annul” your bankruptcy:
    •    you can pay your debts in full (including interest, realisations charges and your trustee’s fees and expenses);
    •    your creditors accept an arrangement called a composition (part payment) of the debt owed (for example repayment of     •    a specified percentage of the full debt); or
    •    you successfully apply to the court for an order annulling your bankruptcy.

An order to annul a bankruptcy will only be made where the court is satisfied that the sequestration order should not have been made, or the bankruptcy appointment should not have been accepted by the trustee.

Do I have to engage a lawyer for bankruptcy matters?

Engaging a lawyer is not compulsory when dealing with bankruptcy matters, but proper legal advice is vital to ensure that you are protecting your rights, as well as maximising your chances of achieving the best possible outcome.

Gibbs Wright’s insolvency lawyers can offer advice on all options to ensure an effective resolution. Call us for no-obligation, confidential consultation.

What can a bankruptcy lawyer do?

A bankruptcy lawyer can offer advice on a matters such as:
    •    negotiating with creditors in a bid to avoid bankruptcy;
    •    alternatives to bankruptcy such as personal insolvency agreements;
    •    how to challenge a bankruptcy notice;
    •    which assets are likely to be vested in a trustee; and/or
    •    what to expect during the bankruptcy process.

Will I need to go to court?

Court proceedings can be costly, time-consuming and stressful, so our lawyers at Gibbs Wright will always attempt to negotiate a resolution before recommending your matter be litigated in a court.

If you are required to go to court for your matter, we will be with you every step of the way.

What is the Gibbs Wright process?

At Gibbs Wright, we work closely with you to determine the best plan for your particular circumstances, taking into account your finances and your expectations.

We will walk you through the steps of the journey, which begins with a free initial discussion to assess the strength of your case and your legal options.

We will request key documents such as contracts, invoices, financial statements or letters of demand to assess this. If we determine that we can help you, we will provide an estimate of fees, depending on the expected cost and complexity of the matter.

Where can we help you?

We are well versed in bankruptcy issues that can affect Australians have an office conveniently located in Brisbane, but we can assist Australia-wide.

So, if you’re looking for a bankruptcy lawyer, call us today to let us handle your matter.

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Who we can help

Being declared bankrupt, or thinking about voluntarily declaring bankruptcy, is a serious and stressful situation to be in, and it can be difficult to navigate all the various aspects involved in a bankruptcy proceeding.

Call Gibbs Wright Litigation Lawyers today for a free initial consultation with one of our experienced litigation lawyers. You can discuss your personal insolvency and bankruptcy matter in more detail and explore your options.

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