What is bankruptcy?
Bankruptcy is a legal term that refers to a person or company being released from their obligations to pay their debts. A court may declare a person bankrupt if they no longer have funds to repay their creditors the money that is owed. Alternatively, an individual may also declare voluntary bankruptcy and lodge a petition with the court to be declared bankrupt. A declaration of bankruptcy is serious and a permanent record is listed on the National Personal Insolvency Index which is publicly searchable and can contain personal information such as name, address and date of birth of the person declared bankrupt.
A trustee will then be appointed to manage your affairs and administer your bankruptcy. This can mean that your property and assets may be sold in order pay off debts to creditors. Once bankruptcy is declared all unsecured creditors must then contact the bankruptcy trustee to seek repayment of their debt while secured creditors will still be entitled to seek repayment of their debts.
Once you are declared bankrupt your personal assets including your family home may be sold in order to repay what is owed. While you may be able to keep your personal household goods such as television and furniture there are items of value that may be taken to be sold by the trustee. If your car is valued at over $7,500 then it is likely to be sold and any money over $1,000 in your bank account is likely to be seized to pay off creditors. Any items of significant value such as artwork, luxury items, inheritance and real estate will be sold to pay off your debts. In certain cases your passport may be taken to prevent you from travelling overseas and you may have to seek the permission of your bankruptcy trustee in order to travel if you have a legitimate reason. The usual time of bankruptcy is usually 3 years and 1 day, but if your trustee lodges an objection your period of bankruptcy may be extended to 8 years.
If your bankruptcy is voluntary you may be able to choose or influence who is appointed to become your bankruptcy trustee. A trustee in voluntary bankruptcy proceedings will be appointed by the court via a sequestration order. If your bankruptcy trustee is court ordered then your trustee will work with your secured creditors to maximise the return on their debts.
A declaration of bankruptcy will affect your ability to obtain future credit and you may that is it more difficult to borrow money and buy things on credit. In addition, basic services which you may have taken for granted will be difficult to obtain in your name, such as gas, electricity or paying a telephone bill as your credit rating will be affected. You are obligated to tell a supplier that you are bankrupt and while you may be able to obtain credit to a certain amount it will be difficult to obtain larger amounts on credit.
In addition, while you will be released from some debts once you are declared bankrupt, you may still have secured debts that remain valid. Debts such as credit card bills, personal loans and store credit will be considered unsecured and you will no longer have to pay them off. However, if a debt such as a mortgage is secured against something the creditor, such as the bank, will be able to repossess the asset and sell it off in order to retain as much of the debt that is owed and covered by your bankruptcy.
How to avoid bankruptcy?
If you or your business are struggling to pay its debts it is best to seek legal advice immediately. Our expert lawyers have dealt with many complex bankruptcy matters and are well versed in giving advice to clients in this area. Our lawyers are competent to advise companies and individuals that are both large and small and can provide you with expert tailored advice to suit your situation. It is better to contact a lawyer sooner rather than later in order to avoid an escalation in the situation and prevent you from facing bankruptcy.
What can Moisson Lawyers do for me if I am facing Bankruptcy?
Moisson Lawyers are experts in bankruptcy law and can advise you with strategies to manage your bankruptcy. In many cases clients wait until the last possible moment before contacting our insolvency lawyers not realizing that the earlier they seek legal advice the better their position can be. Moisson Lawyers will help you through this difficult time by providing clear and concise advice on your bankruptcy matter and offer you flexible terms of payment to suit your needs. Please do not hesitate to contact one of our lawyers if you or your company is potentially facing bankruptcy and we will advise you with expert advice.
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