Declare bankruptcy

Take inventory of what you owe to determine your current debt situation. Sort out your debts by how much and what type of debt you have. Then prioritise them by which ones you will pay off first.

You need to have a clear idea of how much you owe in total, and what each debt is.

Get help straight away. If you or your business has a lot of debt, seek help from a professional, such as a business adviser or financial counsellor.

Financial counsellors are available in every state and territory. They’ll assess your situation and give you advice and options on how to manage the debt.

They may suggest that you ask your creditors (people or businesses you owe money to) to give you more time to pay your debt or accept a smaller payment to settle the debt.

Talk to your creditors and explain your situation. They might be able to offer you a payment plan or accept a smaller payment to settle the debt. Let your creditors know that you want to avoid bankruptcy.

If your creditors don’t accept the agreement, they can choose to take you to court and make you bankrupt.

Bankruptcy is only one formal option available to manage your debt. The Bankruptcy Act 1966 provides 3 other options to deal with debt:

• Declaration of intention – a process which provides a 21 day protection where during this time unsecured creditors can’t take action against you.
• Debt agreement – a process where creditors agree to accept an amount of money you can afford over a set period of time.
• Personal insolvency agreement – a legal binding agreement between you and your creditors where part or all of your debts are paid off in installments.

Learn more about your bankruptcy options.

If these options aren’t viable and you do decide to declare bankruptcy AFSA will appoint you with either an Official Trustee or a registered trustee to manage your assets and debts. You can nominate a registered trustee if you are applying for voluntary bankruptcy.

You can arrange for a private registered trustee to administer your bankruptcy. You’ll need to ask them to complete a consent to act as a trustee form and lodge it with your application. If the trustee you nominate does not lodge a consent to act form, then the Official Trustee will become trustee by default. Ultimately, your creditors have the right to appoint the trustee of their choice. Even if you nominate a trustee your creditors may seek to change them.

If you apply to become bankrupt, you must complete a debtor’s petition form and a statement of affairs form with the AFSA. You need to make sure you read and understand the information required so that everything is correct.

It’s important to include all your debts when applying for bankruptcy. Notify your trustee straight away if you forget to include any.

You need to comply with certain obligations after you declare bankruptcy. When you’re bankrupt:

• you must provide details of your debts, income and assets to your trustee
• your trustee will notify your creditors that you’re bankrupt – this prevents most creditors from contacting you about your debt
• your trustee can sell certain assets to help pay your debts
• you may need to make compulsory payments if your income exceeds a set amount.

You can easily become overwhelmed and emotional when you declare bankruptcy. It is a time fraught with uncertainty. Watch out for unlicensed, unregulated advisers.

Assistance is available to you to help you get back on your feet. Assistance includes:

• financial advice through the MoneySmart website
• career advice through the myfuture website
• talk to a business adviser for legal advice
• The Services Australiacan offer employment and financial assistance.