No one sets out on their adult journey with the intention of filing for bankruptcy. Unfortunately, life circumstances outside of your immediate control sometimes make it unavoidable. Perhaps you became seriously ill and couldn’t work, went through a divorce, or experienced business failure. These things can happen to anyone. For some people, the debt comes primarily from credit cards. They simply owe more than they can reasonably repay.
Bankruptcy may be your best option when you have tried other solutions only to get nowhere with your debt. While you should view it as a last resort, bankruptcy can give you a second chance to turn your financial affairs around.
Who Can File for Bankruptcy and What Protection Does It Offer?
The Australian Government allows anyone with $5,000.00 of debt to apply for Bankruptcy. Once your Bankruptcy has been accepted, Creditors can no longer take legal action against you, nor can they pursue repayment of debts against secured property. Bankruptcy does not eliminate child support or Centrelink Benefit payment obligations.
Property You May Lose to Pay Your Debts
Once a bankruptcy trustee has taken control of your case, creditors can demand the sale of certain items. These include:
- Money owed to you
- Household fixtures
- Shares and stocks
- Cash in a bank account
- Money willed to you
- Profits from your interests in a property
How to File for Bankruptcy in Australia
You need to complete and lodge paperwork with a Registered Trustee or the Australian Financial Security Authority (AFSA) to petition for bankruptcy:
• Debtor’s Petition: This outlines all debts you wish to have included in your filing.
• Statement of Affairs: In this document, you must explain the circumstances that have led to you requesting legal protection from your creditors.
• Acknowledgements: You need to sign several forms verifying that you are requesting bankruptcy protection and authorising the AFSA or your trustee to proceed
Your bankruptcy protection remains in effect for three years. This could potentially extend to five to eight years in certain circumstances. The filing remains on your credit report for seven years and you may have to make payments to your trustee to help satisfy some of your debts. Knowing the consequences of bankruptcy and getting impartial advice on whether you should file are both essential for the best outcome.