Bankruptcy Flashcards
What is bankruptcy?
A legal process that occurs when individuals are unable to pay their debts and either voluntarily apply for bankruptcy or are forced by creditors
What are the two ways to become bankrupt?
Voluntarily
Creditors application
What does Voluntary bankruptcy include?
- Can apply to the official assignee for bankruptcy if debts exceed $1000.
- Complete a statement of affairs detailing the financial situation
- Once accepted will become bankrupt
- Avoids court action but loses control of assets once bankruptcy is declared
What is the creditor’s application?
This is when an individual is unable to pay creditors, so the creditors can apply to the high court to have him declared bankrupt.
The creditor must provide evidence that the debtor has defaulted on obligations
What are the consequences of going bankrupt?
- OA takes control of estate and assets
- Legal proceedings against the debtor related to debts are halted
- Prohibited from being a company director during bankruptcy
When can you be discharged from bankruptcy?
After 3 years you can be released from most debt except obligations like child support
- Can be annulled if all debts are paid or are declared by mistake
What are the alternatives to bankruptcy?
- Composition during bankruptcy
- Proposal prior to bankruptcy
- Summary instalment order
- No asset prodecure
What is composition during bankruptcy?
- Compromised proposal put to creditors
- 75% accepted by creditors
What is a proposal prior to bankruptcy?
- Allows a debtor to avoid bankruptcy by negotiating a deal to repay debts over time
What is a summary instalment order?
- Where a debtor has debts of $40,000 or less an order allows them time to pay the debts
- Application is made to the OA
- Creditors notified and have time for representations
What is the No-asset procedure?
- Debtor has no net realisable assets
- Debts between $1000 and $40,000 and cannot repay any amount towards those debts
