Bankruptcy Brief Summary

WHAT'S THE CAUSE?

For Individual

  • Individual is unable to pay all debts.
  • Personal guarantees provided for company debts are called up.
  • Individual receives letters of demand, writs and/or bankruptcy notices from creditors, debt collectors or solicitors.

For Creditor

  • Not receiving payment of debt.
  • Dishonoured cheques/payments.
  • Trading terms extended or not met by the individual (debtor).

WHAT'S IT ABOUT?

  • An individual becomes bankrupt either:
    • voluntarily (Debtor's Petition); or
    • by an Order of the Court on the application by a creditor (Creditor's Petition)
  • The bankrupt's assets vest in the Trustee in bankruptcy.
  • Trustee recovers and sells assets of the bankrupt for the benefit of creditors and investigates the bankrupt's affairs.
  • Some bankrupts must contribute funds out of their income.
  • Bankrupts imposed with certain restrictions, eg. freedom to travel overseas limited, cannot freely incur debt.
  • The bankruptcy lasts a minimum of three years unless annulled.
  • The debtor disposing or transferring property prior to bankruptcy.

WHAT IT DOES!

For Individual

  • Uncertainty is crystallised.
  • Provides relief from debt problems and extinguishes existing debts.
  • No further harassment from creditors.
  • Can start life afresh after bankruptcy, free of debt.

For Creditor

  • Allows an orderly and equitable distribution amongst all creditors.
  • May recover debts outstanding.
  • Uncertainty is crystallised.
  • The bankrupt's affairs are investigated by an independent expert (Registered Trustee).