Bankruptcy is a legal process that allows people who are unable to pay their debts or ongoing expenses the opportunity to declare insolvency and seek relief.
Though declaring bankruptcy can be considered a way to rescue yourself from a negative financial situation – as it stops all collections actions and lawsuits, and eliminates most but not all debt (excluding government debt in particular) – it is not a process to be taken lightly.
Bankruptcy goes on permanent record and can severely impact people’s lives and careers into the future.
Bankruptcies work in the following process:
Applying for bankruptcy One can either apply for bankruptcy, and enter into insolvency voluntarily or be declared bankrupt by a creditor who has lodged a sequestration order against them.
The latter is less common for individuals, as ordering someone into bankruptcy can be expensive and is therefore usually only carried out against businesses.
Once lodged and approved, a bankruptcy lasts for approximately 3 years.
Appointing a trustee When the bankruptcy process begins, the debtor is appointed a trustee who will assess and handle all of the debtors assets and owings.
An individual entering into bankruptcy must: ● Provide details of all debts, income and assets to the trustee, for them to notify creditors of your filing and which will cease all contact with them directly. ● Work with their trustee to sell assets to pay down debt ● Keep up compulsory payments as part of the bankruptcy process and agreement
Once your application for bankruptcy has been approved, you will be declared bankrupt and begin work with your trustee to manage your situation. You will be declared bankrupt for three years and one day from date of filing and your name will appear permanently on the National Insolvency Index, which is an online list accessible to anyone including banks, landlords and employers.
Bankruptcy can impact applications for loans and credit; require the payment of a bond before connecting gas or electricity; and impose restrictions on an individual for travel, meaning that they wouldn’t be allowed to leave the country without permission and in some cases, may have to surrender their passports entirely.
It is important to understand the options available before you consider applying for bankruptcy and how you might be impacted. Debt Assist’s team of qualified financial advisors can provide you with one-on-one confidential advice for dealing with your financial situation, to help you get back on track.