Bankruptcy is a process where people who cannot pay their debts give up their assets and control of their finances, either by agreement or court order, in exchange for protection from legal action by their creditors. Bankruptcy may occur voluntarily or it may be done on the actions of a creditor. In most cases there is no need for you to appear in court however there are some specific circumstances that may require you to appear in the Federal Court or the Federal Circuit Court.
When you declare bankruptcy, you will be appointed an official ‘trustee’. A trustee is a person or body who manages your bankruptcy. This can either be the official trustee or you may choose to nominate a trustee of your choice. A trustee’s duties vary depending on the circumstances around your debt but they may involve claiming some of your assets if bankruptcy conditions are not met.
The period of Bankruptcy lasts for 3 years and 1 day and during that time there are certain conditions that need to be met. Firstly, you must provide all details of your debts, any form of income and your assets to your trustee. Your trustee will then notify your creditors of your bankruptcy which should cause them to stop chasing you for unpaid debts. Your bankruptcy conditions may also mean that you may need to make compulsory payments if your income exceeds a certain amount.
If you have used a guarantor on some of your debts, bankruptcy doesn’t take away a creditors right to pursue your guarantor for their money so this may still occur once you have declared bankruptcy.
A period of bankruptcy can come to an end either by discharge or annulment. Although a bankruptcy may have ended by discharge, the trustee may continue investigations, realise assets and generally administer the bankrupt estate after discharge. In most cases however, a bankrupt’s discharge will happen automatically and with no ongoing management required.