What does Declaring Bankruptcy mean?
Declaring bankruptcy in Australia refers to the legal process for declaring that you cannot afford to repay your debts. In Australia as a legal individual you can declare that you can’t afford to repay your debts by filing for “voluntary bankruptcy” or “declaring bankruptcy”. Declaring bankruptcy is preferable to being made bankrupt by the court. If you are made bankrupt you will have your financial affairs investigated by the court.
Declaring Bankruptcy and Insolvency
Insolvency is of great importance in declaring bankruptcy. Insolvency is the legal term for your incomings (your wages and other income) being less than your outgoings (debt repayments and other expenses). In declaring bankruptcy specifically this refers to your net income (after tax and Medicare levy) being less than your debt repayments and fixed expenses. Insolvency, declaring bankruptcy and the Bankruptcy Act 1966 are based on this simple concept. If you are insolvent but still able to make some repayment you make consider a personal insolvency agreement, which allows for repayment of less than the full amount as complete payment.
Declaring Bankruptcy, How to?
Declaring bankruptcy is initiated by submitting a Debtor’s Petition with AFSA (the appropriate government agency). A petition legally refers a legal pleading. By signing a Debtors Petition you are pleading that are aware of all the other options, are aware of all the implications of being bankrupt and wish to be made bankrupt.
The second part of declaring bankruptcy involves submitting a Statement of Affairs. This is essentially an assets and liabilities statement. In summary things like you employer, your income, all of your assets and all of your debts are listed (this is an oversimplification). A trustee will be appointed by AFSA to assess your Statement of Affairs to determine what funds, if any, can be obtained for creditors.
Declaring Bankruptcy. Where to from here?
There is more specific detail on bankruptcy on the bankruptcy page. .