Personal Insolvency – Bankruptcy
Many individuals encounter financial difficulties at some stage in their lives. These financial difficulties are not always business related.
Where individuals are involved, debtor agreements, arrangements under Part X or in extreme cases, bankruptcy, may be appropriate strategies.
We approach each task with a view to finding the best solution for debtors as well as the creditors. This approach has seen us become one of Western Australia's leading specialist insolvency firms, being sought by insolvent businesses as well as creditors of those entities.
Bankruptcy is the most extreme stage reached by individuals when dealing with their affairs. It may be a voluntary act (debtor's petition) or may be enforced by a creditor (creditor's petition).
Bankruptcy is, in effect, a rehabilitation process, allowing, with few exceptions, the bankrupt to start life free of debt, after serving the period of bankruptcy.
Bankruptcies generally last for three years unless terminated early under limited circumstances or extended due to lack of co-operation by the bankrupt.
When a person becomes bankrupt:-
• All his/her divisible property vests in the Trustee;
• property includes property acquired after the onset of bankruptcy but before discharge;
• the bankrupt may be subject to public examination of his/her affairs;
• the bankrupt's passport is surrendered to the Trustee and, depending on the particular circumstances, the bankrupt cannot travel overseas without the authority of the Trustee or the Court;
• the bankrupt is required to contribute to his or her estate out of future income beyond a threshold amount;
• the bankrupt may not incur credit beyond a threshold amount without advising the creditor that he/she is a bankrupt;
• the bankrupt may not trade in a name other than his/her own without advising the clients of the bankruptcy;
• the Corporations Law prevents an insolvent under administration from managing a corporation.
The trustee has the role of identifying and realising assets on hand, assessing and collecting contributions from future income, investigating the prior activities of the bankrupt and distributing any surplus assets to creditors.
It is possible for a bankrupt to offer a settlement proposal to creditors, which, if accepted, will result in a discharge of all provable debts, while annulling the bankruptcy. The effect of such annulment, is that, for the record, the bankruptcy is deemed never to have occurred.