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Bankruptcy & Insolvency Law
Bankruptcy of an individual or insolvency of a company occurs when the individual or company is unable to meet their financial obligations. This usually occurs when an individual or company's total liabilities exceed their total assets. This means they owe a greater amount of money than they are able to repay. Bankruptcy and insolvency can be complex and difficult to manage, and a lawyer can help individuals and clients through this process.
For an individual, bankruptcy is a legal process that releases a person from almost all of their debts. The purpose of bankruptcy is to give a debtor a fresh start and to ensure that their assets are fairly distributed amongst their creditors. An individual can apply to become bankrupt voluntarily if they have a debt of any amount that they are unable to pay. Alternatively, a creditor may force an individual into bankruptcy. Once bankrupt, the Australian Financial Security Authority takes over the individualÃ¥s financial affairs and will nominate a trustee to manage them. When a bankrupt individual begins to earn money again or acquires new assets, they will be charged a fee for this management. Bankruptcy lasts for three years from the day it is declared.
A company will be considered insolvent if it is unable pay all its debts as and when they become due and payable. This does not include temporary cash flow problems but only insurmountable liquidity problems. If a company is insolvent, a Court may order that it is wound up and liquidated. It is a serious offence for a company to trade while insolvent. If a company director believes that his or her company is insolvent, they should seek legal advice as soon as possible.