There are two ways in which a person who cannot pay their debts can become bankrupt:
- A person can voluntarily file for bankruptcy; or
- A creditor which is owed $5,000 or more can make an application to Court to make the person bankrupt.
Voluntarily Filing for Bankruptcy
To voluntarily file for bankruptcy a person must complete two forms, being a Debtor’s Petition and a Statement of Affairs. These forms, along with an acknowledgement that the person has read and understood certain information regarding bankruptcy, must be lodged with the Australian Financial Security Authority (“AFSA“). A person voluntarily filing for bankruptcy may appoint the Official Trustee from AFSA to act as their trustee, or they may appoint a private trustee, such as those at Pearce & Heers.
If you are considering voluntarily filing for bankruptcy you may wish to obtain advice regarding your circumstances, the effects of bankruptcy and the process by which you may file for bankruptcy. Pearce & Heers assists and advises numerous individuals regarding this process each year and we can either arrange for the Official Trustee from AFSA to act as a person’s bankruptcy trustee or for one of the Registered Trustees at Pearce & Heers to be trustee.
Bankruptcy by Creditor’s Petition
A creditor can also apply to Court to make a person who is unable to pay their debts bankrupt if they have a judgment against the person for over $5,000 and if the person has committed an act of bankruptcy. A creditor who applies to Court in order to bankrupt a person may elect to have the Court appoint a private trustee as trustee of the bankrupt estate or they may arrange for the Court to appoint the Official Trustee.