A person who is unable to pay their bills or return the loans they have taken can seek protection from their creditors by filing for bankruptcy. During the whole process the assets possessed by the debtor are liquidated and the debts are paid off. Any remaining debt not paid till the end of the bankruptcy period is normally waivered off. While debts can definitely be eliminated, often a certain kind of plan is devised which enables the debtor to return the amount of money over a three year period.
What are the implications of going bankrupt in Australia? Once bankruptcy has been declared, the creditors are stopped from pushing the debtor into returning their loan. Also this would mean an end to any law suits or legal action which were taken against the debtor by his or her creditors.
While a creditor has an option of contesting the stay order, it is up to the judge to make a final decision. When declaring bankruptcy the debtor has to provide documents which prove that they are unable to return their loans. The documents could include everything from previous bank statements to business inventory books etc.
Although filing for bankruptcy sometimes offer a fresh start to most people, they still have to undergo the liquidation of all their current assets. This would include their home, car or any other luxury item which they possess.
If a debtor is found indulged in fraudulent acts of concealing any of their assets, discharge can be denied. This is why it’s important to be honest when filing for bankruptcy.
However, not all debts can be discharged. Debts accumulated through fraud or theft are definitely not considered. Similarly taxes, child support and student loans can’t be waivered off either.
Bankruptcy filing options
There are certain bankruptcy filing options which are known as chapters. You have to make sure to choose the right option based on the type of debts, the amount and the assets that you own. The right lawyer can guide you through the entire bankruptcy process.
A trustee is generally appointed to deal with all the legal proceedings which would include liquidation of assets and repayment of debt.
During the duration of the bankruptcy there are certain restrictions placed on the person, these include:
- If a debtor wants to travel overseas they would have to obtain the permission of their trustee
- They may be restricted from taking any further loan
- All assets would have to be declared openly
- Any new source of income should be mentioned immediately as well
In normal circumstances anyone who has declared bankruptcy could resume their work and continue with their job as well. However, there are certain professions which would restrict a bankrupt person from continuing their job. These include work related to accounting, financial matters, tax agents and solicitors. Sole traders on the other hand can continue working on their business.
Also there are certain alternatives to bankruptcy. The key is to finding a detailed and long term budget plan. The right lawyer could afford you the opportunity to explore your options.