Personal bankruptcy is the legal status of a person who is not able to repay debts to his creditors. This is imposed by a court order, but initiated by the debtor himself because he is certain that life circumstances will remain unchanged and the possibility of paying off the debts within a timeframe will not occur. One of the main criteria for filing for bankruptcy
is that the unsecured debts should be greater than the assets like property, cars etc. that the person owns. This status gives a person another opportunity to make a fresh start as all unsecured debts are waived. However, certain restrictions have to be faced as per the personal bankruptcy rules.
In order to declare personal bankruptcy in Australia
, various criteria have to be met, as well as specific information has to be declared to the trustee who is in charge of the legal proceedings. The first process in this declaration is to complete and lodge forms with a Registered Trustee or with the Australian Financial Security Authority or AFSA. There are three forms, which are Debtor’s Petition, Statement of Affairs, and acknowledgment forms that the former two have been read and understood by the person. It must be noted that there are both benefits and drawbacks in this process. Though the current debts will be written off and cannot be pursued by the creditors, there are penalties and fines that need to be paid to the court. In addition, maintenance orders like child maintenance cannot be stopped. A bad credit report may result leading to difficulty in obtaining credit for a time period. Any assets that the person owns will have to be sold when bankruptcy is filed. Many consider this process as the last resort when it is impossible to consolidate the debt on unsecured loans