Welcome to Cathro & Partners' guide on bankruptcy. Before we delve into the specifics, let's understand some key concepts. Insolvency occurs when an individual or business cannot meet their debt obligations. This guide will clarify terms like 'debtor,' 'creditor,' 'bankruptcy trustee,' and 'bankruptcy' to help you navigate this complex area.
What is Bankruptcy?
Bankruptcy is a legal process where an individual is declared unable to pay their debts as they become due. It provides a fresh start by relieving the debtor from most of their debts. This guide will explore how bankruptcy works and what it means for those involved.
How Can an Individual Become Bankrupt?
There are two main ways an individual can become bankrupt in Australia:
Debtor's Petition: An individual voluntarily declares bankruptcy by submitting a bankruptcy form to the Australian Financial Security Authority (AFSA).
Sequestration Order: A creditor can apply to the court to have an individual declared bankrupt, known as a creditor's petition.
Obligations During Bankruptcy
Once bankrupt, an individual must cooperate with a bankruptcy trustee, who manages the bankruptcy estate. This includes completing necessary forms, providing information on assets and liabilities, and complying with the trustee's requests.
Powers of a Bankruptcy Trustee
The trustee has broad powers under the Bankruptcy Act 1966, including selling certain assets to repay creditors and assessing the bankrupt's income for compulsory contributions if it exceeds certain thresholds.
Travel Restrictions
A bankrupt individual may need to surrender their passport and must seek permission from the trustee to travel overseas. The trustee will approve travel requests if the bankrupt is meeting their obligations.
Duration of Bankruptcy
Bankruptcy usually lasts for three years and one day from the date the bankruptcy form is lodged. However, this period can be extended to five or eight years if the bankrupt fails to comply with their obligations.
Completion and Aftermath
Upon fulfilling the terms of the bankruptcy, the individual is discharged from their debts. It is crucial to plan for financial recovery post-bankruptcy, including rebuilding credit and managing finances responsibly.
Expert Guidance at Cathro & Partners
At Cathro & Partners, we specialize in handling bankruptcy cases, offering expert advice tailored to individual needs. For more information or a no-obligation consultation, please contact us at simon.cathro@cathropartners.com.au.
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