Bankruptcy

SV Partners approach to Bankruptcy

At SV Partners, we firmly believe that bankruptcy is the last resort. Our Personal Insolvency advisors will work with you to find alternative solutions to financial problems.

We operate one of the largest Bankruptcy Practices in Australia, and if bankruptcy occurs we provide objective, practical and expert advice.

As a professional advisor, our role is to help address the situation, with the advice and skills required to provide relief from debt problems and extinguish existing debts.

What is Bankruptcy?
Bankruptcy is a legal process that provides protection to people who are unable to repay their debts or reach a suitable arrangement with their creditors.
Why choose Bankruptcy?
Bankruptcy provides protection for both debtors (bankrupts) and creditors.  The bankrupt is protected from being pursued by most creditors (secured creditors are entitled to continue taking action) and they are released from most debts. 

Bankruptcy protects the interests of creditors by having an independent person (normally a Registered Trustee or the Official Trustee in bankruptcy) appointed to investigate the bankrupt’s financial affairs.  If sufficient funds are recovered a dividend will be paid to creditors of the estate.

How does a person become Bankrupt?
If someone is unable to pay their debts or come to a suitable arrangement with their creditors, they can choose to make themselves bankrupt.  Generally, they must have debts of at least $5,000 and a connection with Australia.  The most common causes of bankruptcy occur when:
  • An individual is unable to pay all debts
  • Personal guarantees provided for company debts are called up
  • An individual receives letters of demand, writs and/or bankruptcy notices from creditors, debt collectors or solicitors

Creditors can apply to Court to make someone bankrupt if:

  • They can satisfy the Court that the person has debts of at least $5,000 and that a bankruptcy notice has expired.
  • They haven’t received a payment of debt
  • There are dishonoured cheques or payments
  • Trading terms extended or not met by the individual (debtor)
  • The debtor disposing or transferring property prior to bankruptcy
What does a Bankruptcy Trustee do?
The Trustee will conduct investigations into the bankrupt’s affairs, recover any property into the estate, report any offences that may have been committed by the bankrupt to AFSA and report to creditors on their findings.

The recoveries that a Trustee can make include:

  • Realising any divisible property
  • Recovering contributions from a bankrupt if their income is over a certain threshold
  • Recovering any voidable transactions

If sufficient funds are recovered by a Trustee, they will pay a dividend to creditors.

What assets can a Trustee realise? 
At the date of bankruptcy, any divisible assets of the bankrupt are controlled by their Trustee.  Divisible assets can include money, vehicles that are worth more than $7,050, property, shares, jewellery and other similar assets.
What assets are exempt from being realised by a Trustee?
Some assets are not divisible and are exempt from realisation by the Trustee.  This can include:
  • Necessary clothing and household items
  • Tools of trade worth $3,600;
  • A motor vehicle worth less than $7,350 (net of any finance owed)
  • Life insurance or endowment policies
  • Certain damages and compensation payments
  • Sentimental property
  • Funds held in a regulated superannuation fund
What happens to a Bankrupt’s income when they are Bankrupt?
If a bankrupt earns over a certain threshold, they are required to pay a contribution from their income to their Trustee.  The Trustee will conduct an assessment of the bankrupt’s liability to pay contributions and will arrange for this liability to be paid by the bankrupt.
What are Voidable Transactions?
Voidable transactions can include:
  • Undervalued transactions
  • Transfers to defeat creditors
  • Preferential payments

The Trustee will conduct investigations into any transfers or sales of property that occurred prior to bankruptcy that would have otherwise been available.  The Trustee will also conduct investigations into payments that were made to creditors prior to bankruptcy to determine if they received a preference to other creditors.

The Trustee can commence proceedings against the recipients of these transactions to recover property for the benefit of creditors.

Which debts are not released by Bankruptcy?
Certain debts are not released by bankruptcy.  This can include:
  • Court imposed fines or penalties
  • Some portions of students loans (HECS / HELP debts)
  • Child support debts
  • Maintenance debts
  • Debts incurred by fraud
How long is someone Bankrupt?
A bankrupt is normally discharged three years after the date that they file their Statement of Affairs.  If a bankrupt does not lodge their Statement of Affairs, they will be bankrupt indefinitely.

A Trustee can extend the bankruptcy period to either 5 or 8 years from the date of filing of the bankrupt’s Statement of Affairs if a bankrupt does not satisfy certain conditions.

What is an annulment of the Bankruptcy?

An annulment is the cancellation of a bankruptcy.  There are 3 ways a bankruptcy can be annulled:

  • The Trustee’s fees and expenses and creditors debts (including interest) are paid in full
  • Creditors accept a bankrupt’s proposal to annul their bankruptcy (this is referred to as a Section 73 proposal)
  • By an order of the Court

If a bankrupt is interested in annulling their bankruptcy, they should contact their solicitor and their Trustee.

Contact Us

SV Partners can assist you with any questions or advice relating to bankruptcy. Please contact one of our expert advisors if you would like more information.

 

Our Personal Insolvency Experts

If you have any questions relating to our Personal Insolvency services, please contact one of our expert advisors.

 

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Handbooks

Alternatives to Bankruptcy Handbook

 

Bankruptcy Information Memorandum

 

 

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