How to Claim Bankruptcy
If you feel you are unable to control your debts and cannot negotiate a reasonable and suitable arrangement with your creditors then bankruptcy may be your best option.
To declare bankruptcy in Australia you will need to meet various criteria and disclose specific information to your trustee. There are many reasons you may need to declare bankruptcy, but there are restrictions, concerns and aspects of bankruptcy which do have consequences and there are alternative to bankruptcy which may provide a better solution to your debt problems. Bankruptcy should be used as a last resort. It is designed to help people who simply can no longer afford to repay their debts. While the process of bankruptcy is straightforward, there are many legal consequences which you should know about..
How To Claim Bankruptcy
To claim bankruptcy in Australia, you will need to first complete and lodge forms with AFSA (the Australian Financial Security Authority) or with a Registered Trustee. It is highly recommended that you talk to someone who has experience in bankruptcy and can help you through the process. Not only will this make it easier on you but it will also help you to move through the process with less problems and concerns. Many benefits are available to those who work with a Registered Trustee through their bankruptcy.
Three main forms must be completed and then lodged with AFSA for you to go through the process of declaring bankruptcy. You can obtain them through AFSA or through your Registered Trustee. These forms include a Debtor's Petition, which outlines what you need to claim. A Statement of Affairs, which will outline your specific reasons for filing bankruptcy in the first place. Finally, you will need to sign various acknowledgements that will show that you, read by you, have received all of the prescribed information and you understand it.
The process is rather straightforward and presents few problems for most people. If you fully cooperate with your Registered Trustee then you will remain bankrupt for three years at least. If there are complications or there are extensions, this could move to five or eight years. Talk to your Registered Trustee to learn more about how this will affect your individual situation.
What Happens When You File?
Is going bankrupt going to help you? There are various benefits to doing so but there are drawbacks as well. If you declare bankruptcy you will be released from your current debts and your creditors will not be able to pursue for these debts. There are exceptions to that rule, such as fines and penalties required by the court to be paid. Additionally you cannot stop paying on child maintenance and maintenance orders in general.
In addition to this your secured debts are treated differently. For example if you own a home with a mortgage and you fail to make you mortgage payments and they fall into arrears then the bank could repossess your home. You still must make and maintain payments on all your secured loans throughout your bankruptcy. If there are any guarantors or joint borrowers on any of your debts then the co-borrower and/or the guarantor remains liable for the repayment of the debt, in full. If that person or those people also file for bankrupt, then they will not be responsible for repaying the debt.
You need to think through these issues before you file for bankruptcy.
Should You File?
When you declare bankruptcy, you are admitting that you have been unable to manage your debts and have that you are insolvent. There are consequences to bankruptcy. Firstly your credit report will be significantly impaired and you will have difficulty obtaining credit for a period of time, and that could be for a period of up to 7 years,. You may have to pay income contributions to your Registered Trustee as payments towards in order to satisfy your creditors, this depends on your income and should be discussed with AFSA or a register trustee. Additionally you may be forced to sell any significant assets you own and have equity in.
Many people unnecessarily avoid bankruptcy because they are ill informed about its affects or have a distorted understanding of its consequences. Bankruptcy is rarely as bad as people imagine and it is sometimes the best option. By avoiding it you can often be getting yourself deeper into debt. For further information you should contact AFSA or a registered trustee to discuss bankruptcy further.
Fox Symes is the largest provider of debt solutions to individuals and businesses in Australia. Fox Symes helps over 100,000 Australians each year resolve their debt and take financial control.
If you are in debt and want to know more about the solutions available to you contact us on 1300 098 127 or fill out the short contact form.