What is Bankruptcy?
Bankruptcy can give you relief from a stressful financial situation. If you are incapable of paying your monthly debts, bankruptcy might be your best choice, however there are some things you need to know.  Bankruptcy normally last 3 three years but can be longer if fraud is expected or unlisted assets are found. Your bankruptcy will become permanent in the NPII (National Personal Insolvency Index).

What About My Property?
You will not necessarily lose all your property in a bankruptcy. Certain property cannot be sold to satisfy debts such as household furniture and your car or primary means of transportation. The value of the your interests in assets must be revealed including for any joint property. Joint debtors are fully liable for payment of the debt.

The bankruptcy trustee will decide which assets will be sold and what money will be distributed among creditors. The trustee may accept less than market value for your property when seizing and selling the goods is not worth the expense. If you want to retain the use of any goods, a friend or family member can make the trustee an offer for them.  Typically items such as ordinary clothing, furniture, appliances, tools of trade, certain policies of life assurance, endowment assurance, compensations for injury, remain the ownership of the debtor.

What About My Income?
After a part of your income is assigned to pay debt there must be enough left for  your normal living expenses including food, rent, and clothing. Often this means you will have more money in your pocket in bankruptcy than you did before. Bankruptcy does not give you a clean credit report. Your debts will diminish and be eliminated eventually but a bankruptcy filing will appear on your credit report for years inhibiting your borrowing power.  

Who Files the Bankruptcy?
You or a creditor or group of creditors may file a bankruptcy petition. When a creditor or group of creditors files this is a creditor's petition. For a creditor to file this petition the amount owed the creditor must be more than  five thousand dollars and when a group of creditors file this petition jointly the total amount of debts owed to all of them by the debtor must be more than five thousand dollars. Anyone with a debt can file a voluntary bankruptcy or debtor's petition for no charge. This is done with the Official Receiver at the Australian Financial Security Authority (AFSA. When the AFSA accepts the petition, you are confirmed bankrupt.

For the most part, upon bankruptcy discharge, all debts incurred previous to bankruptcy are released. Debts in bankruptcy are frequently called the provable debts and creditors are entitled to payment from the bankrupt estate. At the end of the bankruptcy period the debt is released. The types of debts covered by bankruptcy include credit card debts, personal loans, and trade debts. The creditor has the right to sell any secured asset to reduce the debt. Any shortage after the sale of the asset becomes a provable debt in bankruptcy.

Is there an Alternative?
A compromise agreement with your creditors is an alternative to bankruptcy. For this to happen your creditors must agree to allow settlement amounts for payment in full. A debt agreement is also another option. This is allowed only for debtors declared insolvent. You make the best offer you can to creditors after evaluating your expected income and expenses. Your creditors can either accept or deny your proposal. You can propose payments less than what you owe and pay monthly or in one lump sum, declare a moratorium on payments of debts, or sell your property and give them the proceeds.

A bankruptcy is basically a transaction. You give up assets and income for protection from legal action by creditors and for a total release from debts. If you are insolvent and have no assets you are there is not much for you to be giving up. There are restrictions during bankruptcy. You are limited to $3000 in new credit without revealing to potential new creditors you are in bankruptcy, you may not be able to travel abroad, and you must disclose all documents and property as requested by the trustee.

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