Different Types of Bankruptcy

Bankruptcy is a legal status in Australia that is declared when an individual or company is unable to pay their debts. Bankruptcy is a last resort for those who are struggling to keep up with their finances and have reached the point where their debt is unmanageable. When an individual or company is declared bankrupt, their assets are managed by a trustee and any remaining income is used to pay creditors.

There are two main types of bankruptcy in Australia, voluntary and involuntary. Voluntary bankruptcy is when an individual or company decides to declare themselves bankrupt, while involuntary bankruptcy is when creditors take legal action in order to recover debts that are owed to them.

Voluntary Bankruptcy

Voluntary bankruptcy is the most common type of bankruptcy in Australia. This type of bankruptcy is initiated when an individual can no longer pay their debts and decides to declare themselves bankrupt. It is important to note that before opting for voluntary bankruptcy, an individual must have taken all reasonable steps to attempt to pay their debts.

The voluntary bankruptcy process involves the individual submitting a petition to the court to declare themselves bankrupt. The court then appoints a trustee who will manage the bankruptcy estate, which includes the individual’s assets and any remaining income. During this process, creditors will be able to make claims against the bankruptcy estate in order to receive payment.

Involuntary Bankruptcy

Involuntary bankruptcy is a less common form of bankruptcy in Australia and is initiated by creditors when an individual or company has failed to make payments on their debts. This type of bankruptcy can only occur if the debts owed are greater than a certain amount, which is currently set at $5000.

The process of involuntary bankruptcy involves creditors making a petition to the court to declare the debtor bankrupt. The court will then appoint a trustee to manage the bankruptcy estate and creditors will be able to make claims against it. It is important to note that in this type of bankruptcy, creditors are not able to make any further claims against the debtor for the debts that are owed.

Conclusion

Bankruptcy is a legal status in Australia that is declared when an individual or company is unable to pay their debts. There are two main types of bankruptcy in Australia, voluntary and involuntary. Voluntary bankruptcy is initiated when an individual can no longer pay their debts and decides to declare themselves bankrupt. Involuntary bankruptcy is initiated by creditors when an individual or company has failed to make payments on their debts. In either case, a trustee will be appointed to manage the bankruptcy estate and creditors will be able to make claims against it.