What is personal insolvency?
An individual is considered insolvent when they are unable to pay their debts when they fall due and payable and have been unable to do so for some time.
People can get into financial difficulty for a number of different reasons and a change of circumstances to a person’s financial situation can cause a person to fall behind on repayments and struggle to get on top of their debt.
Quicklink to: Bankruptcy | Personal Insolvency Agreement | Debt Agreement
Bankruptcy
If you are insolvent you can choose to enter into a voluntary bankruptcy in which you declare yourself bankrupt by completing a Bankruptcy Form, available from the Australian Financial Security Authority (AFSA) website. Alternatively, a creditor to whom you owe money may also make you bankrupt by filing an application for the making of a sequestration order with the court.
Once the administration of your bankruptcy commences it will normally last for three years and one day. A trustee will be appointed to manage your bankruptcy and you will be required to provide information about your financial affairs. Your trustee will take control of your assets and sell them to raise monies to pay your debts.
During your bankruptcy you will be required to provide details of your annual income and may be required to make contributions to your bankrupt estate. In some circumstances, if you fail to comply with your trustee’s request to provide information, disclose income, assets or debts, your trustee can file an objection to your discharge from bankruptcy and the bankruptcy could be extended for a period of up to eight years.
It is important to note that if you file for bankruptcy there may be international travel restrictions and possible professional restrictions.
The principals of Sheahan Lock Partners are experienced trustees in bankruptcy who can advise on the likely consequences for you of going bankrupt.
Personal Insolvency Agreement
A personal insolvency agreement is an agreement entered into between you and your creditors to compromise your debts, as an alternative to bankruptcy. A trustee is appointed to manage and negotiate the agreement. In the event that a personal insolvency agreement is declared void or is terminated by the court, a sequestration order may be made against you, making you bankrupt.
We at Sheahan Lock Partners can advise on whether a personal insolvency agreement might be appropriate for you and the consequences of making such a proposal to your creditors.
Debt Agreement
A debt agreement is another alternative to bankruptcy. It is a legally binding agreement between you and your creditors to pay your debt over an agreed period of time without becoming bankrupt. A debt agreement is intended to provide low-income debtors and their creditors with an informal and inexpensive alternative to bankruptcy.
The partners and staff of Sheahan Lock Partners can advise on whether a debt agreement might be appropriate for you.
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