Personal Service Offerings
With rising interest rates and cost of living expenses, it comes as no surprise that more individuals are finding themselves in financial difficulty and unable to manage their debts. We provide advice to individuals in financial distress about the alternatives available to them.
General Advisory Services
Our experience and knowledge of the likely outcomes under formal personal insolvency processes allows us to provide general advice to individuals to navigate issues such as Director Penalty Notices and negotiating payment arrangements and settlements with creditors.
We utilise the same knowledge when providing advice to creditors as to the merits and commerciality of undertaking actions to recover debts from individuals.
Bankruptcy
Bankruptcy relates to the insolvency of an individual. There are similarities between the liquidation of a company and bankruptcy of an individual in terms of the commencement. That is, a person may become bankrupt voluntarily or a creditor can make a person bankrupt by way of an application to Court for a sequestration order.
Bankruptcy will generally provide a person with relief in terms of creditors pursuing most debts and allow a fresh start. There are however consequences to a person becoming a bankrupt, which include but are not limited to the following:
- A trustee will be appointed to manage the bankruptcy administration;
- A bankrupt is required to keep this or her Trustee informed of any changes to their circumstances;
- A bankrupt must obtain permission for his or her trustee prior to travelling overseas;
- A bankrupt cannot participate in the management of a corporation;
- All divisible property of the bankrupt at date of bankruptcy vests in his or her trustee and the trustee may sell those assets. Certain property does not vest in a bankruptcy trustee. This property generally includes most household effects, life and superannuation policies and basic and equity in a motor vehicle and tools of trade up to a prescribed amount;
- A bankrupt will be required to pay compulsory contributions to his or her estate if he or she earns an income in excess of a prescribed threshold;
- A bankrupt is unable to incur credit of approximately $6,850 without disclosing his or her bankruptcy.
What is the bankruptcy trustee’s role?
Typically, a bankruptcy trustee role entails the following:
- Giving notice of the bankruptcy to creditors and information about the administration of the estate to a creditor who reasonably requests it;
- Investigating a bankrupt’s affairs to determine the existence of property that may be realised for the benefit of the estate and any potential recovery actions that may be void against the trustee i.e. a transfer of property;
- Preserving, protecting, and realising (where it is commercial to do so) divisible property that forms part of the bankrupt estate;
- Reporting to creditors about a bankrupt’s affairs and the likelihood of creditors receiving a dividend from the estate;
- Taking whatever action is practicable to try to ensure that the bankrupt discharges all of the bankrupt’s duties under the Bankruptcy Act;
- Considering and reporting offences against the Bankruptcy Act to the relevant authority; and
- Adjudicating the claims of creditors and distributing monies in the accordance with the priority provisions of the Bankruptcy Act.
How does a bankruptcy administration end?
Unless a trustee has lodged an objection, a person will receive the benefit of being automatically discharged from bankruptcy 3 years and 1 day from the day that the Official Receiver accepts his or her Bankruptcy Form. Certain types of debts are extinguished when a person is discharged from bankruptcy, the exceptions to this are:
- Penalties and fines imposed by a Court in respect to an offence against a law.
- Damages claims from accidents (e.g. car accidents) unless, before bankruptcy, the sum of damages has been fixed by a Court judgment or the debtor has a written agreement with the other party as the quantum of damages.
- Debts under maintenance agreements or orders (which includes child support debts).
- Certain student (HELP) debts.
- Debts incurred by fraud.
It is possible for a bankruptcy to come to end earlier if it is annulled.
A bankruptcy will be annulled if:
- Creditors accept an offer of composition (an offer to pay creditors an amount in full and final settlement of debts) made by the bankrupt pursuant to Section 73 of the Act;
- If all debts and costs of the bankruptcy administration are paid in full;
- The bankrupt may apply to the Court for an order annulling the bankruptcy on the basis that the debtor’s petition should not have been accepted or that the sequestration order should not have been made by the Court.
A Personal Insolvency Agreement (PIA) under Part X of the Bankruptcy Act is a flexible way for an individual to come to an agreement with their creditors to settle debts without becoming bankrupt.