In this tough economic climate, there are going to be times when people will either consider voluntarily becoming bankrupt, or are ordered to become bankrupt.
Basically, bankruptcy is giving someone else control of nearly all your property and finances, and you will get protection from creditors. There is no set amount of debt needed to be able to enter bankruptcy
For a creditor, this can take away any chance of recovering their debt. Quite often, a person declares bankruptcy without considering the consequences over the coming years. After a debtor has read through the information regarding bankruptcy, the court is informed of the financial situation of the individual which is frequently called “filing for bankruptcy”.
Bankruptcy normally lasts 3 years, but in some circumstances, can be extended to 5 or 8 years.
The main effect of bankruptcy is that creditors are no longer able to recover debts. There are still some debts that are not affected, such as Council rates, HECS fees, and child maintenance.
Employment can be more difficult to obtain if you are bankrupt. Typically, a bankrupt cannot be a Lawyer or a member of the Police Force. Liquor licenses, building licences and certain finance and tax licenses are not available to bankrupts.
Your credit rating will be affected indefinitely. The approval is ultimately up to the discretion of the financial institution, but in most cases if you were to buy something such as a stereo or an expensive motor vehicle whilst bankrupt, they could be claimed and sold by the trustee.
If a debtor has disposed of property for less than market value in a certain time period close to filing, that property could be claimed by the trustee.
Bankruptcy can provide immediate relief for the debtor, and can provide immediate grief for creditors. The ongoing effects are often not considered.
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This is intended for general information and does not constitute legal advice and should not be relied upon as such. Formal legal advice should be sought.