Bankruptcy NSW - A How To Guide

If you can no longer reach an agreement with your creditors about paying your debts then, you may have to consider bankruptcy. When you declare bankruptcy you are protected under the Bankruptcy Act of Australia (1966). Under this act people who are facing financial hardship can receive relief from their debts through a legal process. Bankruptcy in NSW has the same procedures as all other states in Australia.

How Bankruptcy In New South Wales Works

Bankruptcy in Australia can work in 2 ways. The most common is called voluntary redundancy. This happens when the person who is in debt files for bankruptcy. The other way is when the debtors creditors seek to have the debtor declared bankrupt through the federal magistrates court of Australia by submitting a creditor’s petition.

In order to receive debt relief through bankruptcy a transfer must take place. This involves transferring your assets and properties over to the federal or magistrates court. In return the courts will provide you with legal protection from your creditors. This means your creditors can no longer harass you for debt repayments otherwise they will be in contempt of the court.

A federal court official called a trustee will be assigned to your case and their role is to take control of your assets once the transfer is made. The trustee will decide which of your assets are to be sold off to pay your creditors. As well as assets your income will also be assessed  by the trustee and if it exceeds a certain limit you may have to pay the trustee who will in return pay your creditors.

With bankruptcy NSW laws there are no minimum limits on how much debt you have to qualify in order to file for bankruptcy. However, you do need to be an Australian resident or own a property in Australia at the time  you declare yourself bankrupt.

What You Can Keep And What You Could Lose

There are certain assets that you can keep and assets that will not qualify for protection. The following are a list of assets that you may hold on to:

• The majority of household and personal belongings
• Vehicles up to a certain limit of value
• Tools of your trade
• Compensation payouts due to personal accidents and injury
• Life Assurance polices
• Superannuation payouts

The following are assets and properties that may be sold off:

• Residential property
• stocks, shares and investments
• Tax refunds
• Sale proceeds from an estate owned by a deceased person who has past away either before or during your bankruptcy case

Before filing your case you should request the guidance of an ITSA trustee administrator or a bankruptcy legal expert who can help you evaluate what assets you can protect.

How To File For Bankruptcy

To declare yourself bankrupt you must obtain and submit the appropriate voluntary bankruptcy paperwork and legal application forms. These forms include a debtors petition, a statement of affairs and a signed acknowledgement form agreeing that you have read and understood the relevant information.

If you need help with filling out the legal forms you should consider the help of a reputable financial counsellor. They can provide you which guidance on which debts you should list in the statement of affairs. Once you have the forms completed you will need to file with the ITSA.

ITSA is the Insolvency and Trustee Service who are the government body that administer bankruptcy and insolvency cases in Australia. At this stage you should also appoint a registered trustee to handle the administration of your assets and property.

The laws regarding bankruptcy in NSW Australia state that a person will remain bankrupt for a period of up to 3 years as long as the debtor fulfils their obligations as outlined by the trustee. If the debtor reneges or is uncooperative then, the process can be extended up to a period of eight years before the debtor is finally discharged.

The Advantages Of Bankruptcy

The main advantage is that your debts can be cleared allowing you to start afresh. The other advantage is that your creditors can not legally pursue you in payment of those debts as you are protected under the Bankruptcy act.

However, it is important to point out that not all debts can be protected under the act.

Debts that are not protected or do not qualify are as follows:

• Any fines are charges brought to you by the courts
• Outstanding government debts such as HECS loans
• Child maintenance payments
• College and student debts

The Disadvantages of Going Bankrupt

The key disadvantage is that you can lose control of your assets and property which can also be sold to pay off your debts. Personal insolvency records will also be permanently recorded on the on the bankruptcy NSW register.

Once you are declared a bankruptcy notice will be recorded on your credit report for a period of 7 years. This will affect your credit rating and lower your credit score making it more difficult and expensive for you to borrow.

Bankruptcy can also affect your career if you work within certain professions. You cannot take on the role of a company director or run a company while you are bankrupt.

Alternatives To Bankruptcy

Although bankruptcy can clear certain debts and unsecured debts it should only be considered as a last resort. If you are experiencing financial problems there are alternatives that you may want to consider before bankruptcy. For example, a debt agreement is a legally binding agreement between you and your creditors. For this to work you need to be insolvent. This means you are currently unable to pay your debts that are now due.

The agreement can devise different alternatives for you to afford to repay your debts and for the creditors to get their money back. An example, would be to extend your payment terms which involves spreading your debt over a longer period of time. This results in making your monthly payments lower but in the long run you pay more as your paying the interest over a longer period of time.

A debt agreement will be recorded on your credit file however, it will not have as big a negative impact compared to bankruptcy.

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