BANKRUPTCY AND ITS ALTERNATIVES
A person who is insolvent is unable to pay their debts as and when they fall due, and may become bankrupt. When someone becomes bankrupt, a trustee is appointed to their property. The role of a trustee in bankruptcy is to investigate the bankrupt’s property and financial affairs, realise any assets that are available, and possibly pay a dividend to creditors.
A person may become bankrupt:
- if a creditor of the person has filed a creditor’s petition seeking orders declaring the person bankrupt, and the Court declares them bankrupt; or
- if the person declares themselves bankrupt, by presenting a debtor’s petition with the Australian Financial Security Authority.
An insolvent person may also appoint a controlling trustee and propose an arrangement, called a Personal Insolvency Agreement, in order to avoid bankruptcy. A person who has already been made bankrupt may also propose an arrangement, called a Composition or an Annulment, in order to end their bankruptcy. In either case, the person’s creditors vote whether to approve the arrangement, and if the arrangement is approved then bankruptcy will be avoided or the bankruptcy will end.
If you are a creditor then it can be a challenge to recover a debt from an insolvent individual, and if you are insolvent or have an insolvent partner you should be aware of the options available to you, including those under the Bankruptcy Act.
Uther Webster & Evans can to provide you with advice and assist you with your commercial and personal affairs.
