What is it?
Put simply, bankruptcy is a legal process that releases you from your debts. It occurs when you cannot pay the debts owed to creditors. While it might sound frightening, it puts an end to your struggle to repay debts and enables you to start saving money and plan for the future.
What are the benefits?
Filing for bankruptcy is a quick process. The Australian Financial Security Authority deals with applications for bankruptcy and there is no minimum amount that needs to be owed before you apply. Once processed, a trustee realises any assets and conducts investigations into your affairs. And once a bankruptcy petition has been filed, there is an automatic stay, which prohibits creditors from making further collection attempts.
What are the consequences?
Filing for bankruptcy can mean the loss of your family home, although under certain circumstances there are options to save it – unless one of your creditor’s takes action first to bankrupt you. Thus it’s important to act quickly by speaking with Corporate Guardian’s specialists.
There’s also a permanent record of your having been bankrupt and bankruptcy will be listed on your credit file for five years. Bankruptcy itself generally lasts three years, however that period can be reduced or extended. Once your bankruptcy ends most of your debts are released and you no longer need to repay them. Having your bankruptcy discharged also means you will be able to:
- Travel overseas without needing your trustee’s permission
- Buy a home
- Apply for credit (be aware that your credit report will continue to show your bankruptcy for either two years from when your bankruptcy ends or five years from the date you become bankrupt – whichever is later)
How to declare bankruptcy:
- Check that the bankruptcy criteria applies to your situation:
- You have more than $5,000 in debts and are completely insolvent.
- You are present in Australia at the time you file for bankruptcy.
- To file for bankruptcy you can go directly to the Australian Financial Security Authority (AFSA), the government agency that considers bankruptcy applications, or you can talk to Corporate Guardian’s personal insolvency specialists to act on your behalf.
- AFSA will assess if you are able to repay your debts in full within a reasonable period of time.
- Complete and lodge the bankruptcy forms. This includes:
- 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; and
- various acknowledgements that show you have received all of the prescribed information and that you understand it.
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