With lenders breathing down your neck, bankruptcy might seem like the answer to all your problems. Generally speaking though, you should try all the other options on the table to rectify your financial situation before making the decision to go bankrupt.
Even though money is probably tight at the moment, it’s worth finding the funds to get some advice from a competent professional like a financial planner, registered trustee, or accountant. They may be able to suggest an alternative course of action that you had not considered yourself.
Other possibilities to declaring Bankruptcy
Before you take the plunge, consider the following alternatives.
An Informal Agreement
If you have an income, there’s a good chance you’ll be able to reach an agreement with your creditors to
repay your debts over a feasible time period. The agreement could be kept private, though of course everything
should still be documented. The downside to an informal arrangement is that it’s not necessarily legally
binding. The more creditors you have, the harder it will be to pull off an informal arrangement – while some of
your creditors may agree to a payment plan, others may still decide to pursue a more aggressive course and take
legal action against you.
A Formal Agreement
A Formal agreement – that is, an agreement which is legally binding for both you and your creditors – is the other option to declaring bankruptcy. To make a Formal Agreement, you’ll need a reliable source of income or assets to exchange with your creditors in return for them writing off your debt. As a general rule, you should not try to craft a Formal Agreement yourself, but instead meet with a registered trustee to determine the best course of action.
Declaring Bankruptcy
If you have investigated all avenues and are convinced that a formal or informal agreement is not possible then voluntary bankruptcy may be your only viable option.
The first step is to complete a Debtor’s Petition and Statement of Affairs which you can obtain from the Insolvency and Trustee Service Australia website or by visiting a registered trustee.
You’ll need contact and debt details for each of your creditors. You’re legally required to show all business and personal debts that you’re liable for. You’ll also need to provide details of your income and assets, including (but not limited to) your car, house, bank accounts, shares, and any money that is currently owed to you. Note that there are harsh consequences for failing to mention property or otherwise trying to conceal valuables.
Once you’ve completed the Statement of Affairs and Debtor’s Petition, and signed the acknowledgement that you have read and understood the Prescribed Information, you need to get your forms to ITSA, either by posting them or by delivering them by hand to an ITSA in your area.
As soon as the forms are accepted by the Official Receiver in Bankruptcy you become bankrupt.
