Andrew Wily - Guide To Declaring Yourself Bankrupt

There are two ways to become bankrupt. A creditor can petition the Court to declare you bankrupt by providing evidence that you have committed an act of bankruptcy, or you can declare yourself bankrupt – voluntary bankruptcy. If you are considering the latter option, it is recommended that you seek professional advice before taking this step. This article provides some helpful information on the process involved in declaring yourself bankrupt.

Voluntary Bankruptcy
There is no minimum amount of debt you have to owe before you can file for voluntary bankruptcy. Declaring yourself bankrupt follows a certain procedure proscribed by the Bankruptcy Act of 1966 (‘the Act’). Once you have considered all your options and decided that declaring bankruptcy is your best course of action, the following are the specific steps to take:

Step 1
You first need to complete a Debtor’s Petition and Statement of Affairs. The Statement of Affairs must disclose all personal information and full details of your financial affairs, including the following:

• Your name and address;• All personal and business debts for which you are liable;• The amount you owe to each of your creditors; and• Full details of your income and assets, such as a house, a car, a bank account, shares and stocks, or any money owed to you.

You must disclose all property in the Statement of Affairs.  Failure to do so by hiding or unlawfully disposing of a property or any item of value is considered a breach of the law. Severe penalties, including imprisonment and extension of your bankruptcy can be imposed.

All forms are available from the Insolvency and Trustee Services Australia (ITSA), the government body that officially handles all cases of bankruptcy.

Step 2
The Debtor’s Petition, and the completed Statement of Affairs must be lodged with ITSA. You may post or hand-deliver these documents.  If you wish to have a private Trustee administer the bankruptcy then the documents need to be provided to the Trustee.

Step 3You need to wait for ITSA to process your forms. It normally takes around 24 to 48 hours for your forms to be accepted by the Official Receiver in Bankruptcy and for you to be declared bankrupt. A letter confirming your bankruptcy number will be sent to you.  It is important that you keep this number nearby as you will need it in all correspondence with ITSA all throughout the period of your bankruptcy. The letter will also contain all your duties and obligations as a bankrupt.

What Happens Upon Declaring Bankruptcy?
ITSA takes over all cases of bankruptcy filed voluntarily and they may delegate them to private Trustees to administer. However, you may appoint a Registered Trustee to administer your estate, provided you have obtained the Trustee’s written consent.

What are my obligations under voluntary bankruptcy?As an undischarged bankrupt you are legally required to meet certain obligations.  Your obligations restrict you from travelling, unless you have your Trustee’s permission, obtaining credit over a prescribed amount, managing a corporation or running a business.  You must also advise your Trustee, if you change your name or principal place of residence and cooperate with all the Trustees requests.

What happens to my assets?
Pursuant to Sections 58 and 132 of the Bankruptcy Act, upon declaring bankruptcy control of your assets automatically vests in the Trustee. Any assets acquired during the period of bankruptcy, such as lottery winnings or inheritance from a deceased estate, also vests in the Trustee. For more detailed information on what happens to specific assets i.e. car and family home.

Moreover, if you are earning an income that is more than the value of a threshold amount, you are required to make regular income contributions of 50 cents of every tax dollar above the indexed amount.

Can my bankruptcy be annulled?Yes. Section 153A of the Act provides that your bankruptcy is annulled at any time during the three-year period if all your debts are paid in full. For a further explanation on annulling or terminating of your bankruptcy.

You may also make a Section 73 proposal, which is an offer to settle all your debts by using monies not available to your creditors in your bankruptcy, such as money from relatives or friends. The Trustee convenes a meeting of the creditors to vote on your proposal. If a majority in number and 75% in value of all creditors who participate in voting on your proposal accept the offer, a special resolution is passed to annul your bankruptcy.

We hope this article has satisfactorily answered your questions on declaring yourself bankrupt. For further information on voluntary bankruptcy, please contact us directly via e-mail or through our Insolvency InfoLine 1800 802 702 for a FREE consultation.

The information in this article was correct at the date of posting and should be relied upon as a guide only.  We urge you to always seek professional advice before taking any further action.