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Declaring Bankruptcy
What does Declaring Bankruptcy mean?
Declaring bankruptcy in Australia refers to the legal process for declaring that you can not afford to repay your debts. There are two ways to go declaring bankruptcy. In an effort to get some of their money back creditors may make you bankrupt (involuntary bankruptcy) through the courts. In Australia you can yourself as a legal individual 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.
Declaring Bankruptcy, How to?
Declaring bankruptcy is initiated by submitting a Debtor’s Petition with ITSA (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 ITSA 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. .