What is Bankruptcy
Bankruptcy is a legal process in which a person or an entity is declared unable to repay debts to creditors.
Bankruptcy is often viewed in a negative light, but it can provide relief from overwhelming debt, allow you to start over financially, and free you from most of your debts.
A person can be made bankrupt:
- by a creditor who obtains an order from the Court for the person to be sequestrated (bankrupted); or
- by voluntarily declaring themselves bankrupt through a debtor’s petition.
According to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, bankruptcy lasts for a period of 3 years and 1 day.
When a person declares bankruptcy, a trustee is appointed to manage the bankruptcy. The trustee, either an Official Trustee or a registered private firm, manages the bankruptcy .
Bankruptcy is a complex legal proceeding. Before declaring bankruptcy, you should consult with your accountant, financial planner, lawyer, or an insolvency professional.
Brisbane Debt Solutions can provide you with advice tailored to your specific circumstances, and determine the best course of action for dealing with any unmanageable debts.
Some things you should know before declaring bankruptcy include:
- Bankruptcy can often be avoided, as it is just one of several ways to deal with your debts. Other formal options include negotiated arrangements and debt agreements.
- Bankruptcy can have a variety of negative consequences, including restrictions on your ability to obtain credit, travel overseas or hold certain types of employment.
- Bankruptcy does not release you from all debts. While bankruptcy can relieve individuals of liability for most unsecured debts, there are exceptions.
- A publicly-accessible National Personal Insolvency Index (NPII) will contain your name after you apply for bankruptcy.
- Bankruptcy can affect your ability to obtain—and your ability to pay back—credit. If you apply for credit over a certain amount, you must disclose your bankruptcy.
- Credit reporting agencies keep a record of your bankruptcy for 5 years from the date you file for bankruptcy or from the date you stop making payments on a previous bankruptcy, whichever is later.
Bankruptcy is a legal procedure. Seeking professional advice before you declare bankruptcy is advisable.