About Bankruptcy
Bankruptcy is a legal process through the Federal Court. It serves to clear away most of your debts (there are some exceptions). It can also stop any further legal action by lenders and give you a fresh start.
Bankruptcy can be one of many solutions to debt problems for people who are insolvent. When somebody is insolvent, they have insufficient income or assets to meet the required payments on their debts.
However, it can be a complicated process. It is important to seek what options are available to you from a free and confidential financial counsellor.
What Happens During Bankruptcy?
An appointed trustee oversees your finances and assets and determines if they can repay your debts. The Trustee can order the sale of your assets including your house, car and valuables to repay creditors. You can only save and earn a limited amount before the trustee takes a slice to repay your debts. See consequences of bankruptcy for further information.
Bankruptcy comes with limitations. You need to understand these limitations and how they might impact your particular circumstances and whether there are other options. You can find more information on the AFSA website here. If you need to discuss your situation in detail, make an appointment with a Financial Counsellor.
Voluntary vs Involuntary
You can apply for bankruptcy as a ‘debtor’ if you can't pay your debts. This is Voluntary Bankruptcy. You should seek detailed information from a Financial Counsellor to help you determine if Voluntary Bankruptcy is right for you.
An Involuntary Bankruptcy is when a creditor takes legal action – a Creditors Petition or Sequestration Order - to force a debtor into Bankruptcy over outstanding debts of at least $10,000.
If you face Involuntary Bankruptcy, you need to seek legal or financial counselling help immediately, particularly if you have assets that might be at risk.
Note that this process does not wipe out all debts. See the Australian Financial Security Authority (AFSA) website for further details.
Also, where debts are joint, the other party will likely still be pursued by the lender after you are made bankrupt. Where debts are secured, you may be able to keep the asset, depending on its actual value, but will be required to continue paying the debt.
Can Better Place Australia Help Me Learn More About Bankruptcy?
Better Place Australia free financial counselling and mediation services are available to people who have money troubles, including those on the verge of bankruptcy. If you live in one of the many government funded areas across Victoria, your first step is to enquire online or request an appointment.
You can also read real stories about people with financial troubles and how Better Place Australia financial counsellors mediated for them.
