Bankruptcy Lawyers Brisbane

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 identified, sold and distributed appropriately to creditors.

Bankruptcy allows the person to start afresh by forgiving debts that 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).

There are only two ways a person can become bankrupt:

• debtor’s petition: the debtor voluntarily submits a petition and statement of affairs to AFSA to be declared bankrupt; or
• 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.

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 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.

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 the 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 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 suspended.
• Hold licenses: a bankrupt’s ability to hold a license will be impugned where a licensee is required to be a fit and proper person. Eg. building contractor.

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 a means of transport (subject to the value threshold);
• property that has sentimental value; and
• Superannuation

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 any particularasset 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.

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, realisation 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.

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.

A bankruptcy lawyer can offer advice on 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.

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.