Posted by: Angelo Venardos | Date: 19 September 2013
Bankruptcy relates to individuals only. Individuals generally become bankrupt in one of two ways. The individual either declares bankrupt voluntarily or is forced into bankruptcy by a creditor (the person who is owed money by the bankrupt).
An individual with a provable debt, such as a taxation debt, electricity and water bills, etc can apply to place themselves into bankruptcy. Obviously making the decision to declare bankruptcy is not one that should be made lightly. When making the decision to become a bankrupt an individual is required to complete a debtor’s petition and a detailed statement known as a Statement of Affairs.
A Statement of Affairs requires an individual to outline absolutely all of their liabilities, i.e. all of the money that the individual owes to a third party.
It is generally advisable to have a independent individual appointed as your trustee in bankruptcy to assist you through the bankruptcy process which can last up to seven years. The bankruptcy process lasts a minimum of three years unless an individual applies to have a bankruptcy annulled earlier.
All debtors petitions are submitted to the Australian Financial Security Authority (AFSA) formerly known as the Insolvency and Trustee Service Australia (ITSA).
A debtor’s petition can be rejected by the Official Receiver within AFSA. This generally only occurs if the individual who applied to be made bankrupt has the ability to satisfy all of their liabilities within a reasonable time period, i.e. the individual has the ability to pay everyone to whom they owe money.
If you are owed money by someone and that person is refusing to pay you, you can apply to the Federal Court of Australia or the Federal Circuit Court of Australia if the debt you were owed is over $5,000.00 to place the individual into bankruptcy.
Before you can apply to place a person into bankruptcy you must first obtain a judgment against the individual. A Bankruptcy Notice must then be prepared based upon that judgment and sent to AFSA for issuing.
That Bankruptcy Notice must then be issued to the relevant individual who owes you money.
That individual will then have a period of 21 days to make payment to you. Should they fail to do so you can then file what is known as the Creditor’s Petition in either the Federal Court of Australia or the Federal Circuit Court of Australia to place the individual into bankruptcy.
That Creditor’s Petition will then be heard by the relevant Court generally within two to three weeks after the Creditor’s Petition is filed. If at the hearing of the Creditor’s Petition the individual who owes you money has not made payment to you a declaration will be made that the person is bankrupt and the relevant Court will issue a sequestration order, resulting in the divisible property of the individual who owes you money coming under the control of a trustee in bankruptcy.
Individuals are often concerned that if they are married and become bankrupt it will have an effect on their husband or wife.
Placing yourself into bankruptcy will not have any effect on your husband or wife provided that your husband or wife is not a guarantor or any of your debts and/or has a joint liability that you are also liable for and/or is a joint owner in the property with you.
If a couple in a marriage or otherwise together have joint debts, the two individuals can submit separate debtor’s petitions and Statement of Affairs. The individuals’ joint debts must be shown in full on each of the individuals Statement of Affairs. This is due to the fact that each individual is fully liable for the payment of those debts and the debts cannot be proportioned between the two.
If you have any questions relating to bankruptcy, please contact me.