Welcome to Bankruptcy Information. If you’re thinking of declaring yourself or your business bankrupt, it’s absolutely crucial that you educate yourself on the correct process before making any decisions.

What is Bankruptcy all about?

Essentially, bankruptcy is a legal process whereby the debtor officially declares their inability to repay their debts. It offers certain legal protection to the declarer and has important ramifications for both creditors and debtors.

There are two fundamental ways in which an individual or business can be  made bankrupt – either voluntarily, by completing and filing the appropriate paperwork, or involuntarily, by order of a court. The latter generally occurs at the instigation of a creditor who is owed $2000 or more.

Is Bankruptcy the right option for me?

As a debtor, you should only really consider declaring bankruptcy after you’ve explored all the other options first. When you are declared bankrupt, your details get recorded on a government database known as the National Personal Insolvency Index, or NPII. Banks and other creditors will generally always consult the NPII before they’ll lend anyone money, so declaring bankruptcy is likely to severely hurt your ability to obtain credit.

How do I declare Bankruptcy?

Declaring bankruptcy is a fairly simple process. A debtor’s petition, statement of affairs, and acknowledgement that you have received and read over the ‘prescribed information’ needs to be lodged with a registered trustee or directly with the Insolvency and Trustee Service of Australia (ITSA).

Filing for bankruptcy is free, though if you choose to go through a registered trustee, they are entitled to remuneration. These fees can generally be taken out of the proceeds of a property sale, so long as the creditor(s) provide their consent.

Bankruptcy lasts a minimum of three years if you can come to an acceptable agreement with your creditor(s) and consistently meet your obligations, though under certain circumstances this may be extended to 8 years.

What are the consequences?

Going bankrupt means that in most circumstances, debtors are unable to commence or continue debt recovery actions against you. Note that this only applies to unsecured debtors – secured creditors are still able to seize your property if you don’t meet your loan repayments. You’re also still liable for:

• HECS Payments
• Court Fines/Penalties
• Child Support
• Council and Water Rates

Declaring bankruptcy will generally not affect your employment opportunities, though you may be barred from some vocations like police officer or security guard. You’ll typically also have difficulty obtaining liquor, tax agent, real estate, financial, and builder’s licenses.

If you still feel that going bankrupt is the right option for you, you will find more resources on this site to assist you. Start by checking out the Bankruptcy Advice section.