A member asked almost 9 years ago

Bankruptcy definition

What is bankruptcy?

Dane Grauf
Director at Grauf O'Brien Lawyers

Where an individual is insolvent it is possible for their estate to be dealt with under the Bankruptcy Act. The bankruptcy may be entered voluntarily under what is known as a debtor’s petition or it may be made by order of the Federal Court which is what is usually termed a sequestration order based upon a creditors’ petition. Under a debtor’s petition an individual is required to also file a statement of affairs. For a creditor’s petition it is necessary to show not only that the debtor is insolvent but also that the debtor had committed an act of bankruptcy (see our earlier blog article on Bankruptcy Notices and Creditors Petitions) within six months of the presentation of the petition.

On the commencement of bankruptcy, all of the individual’s property vests in a trustee in bankruptcy. The trustee then gains control over the property and in some situations the income of the debtor. There is some property that is exempted from this control, like superannuation (in most circumstances). Once a person is made bankrupt certain obligations rest upon the debtor to provide information and generally assist the trustee who is controlling the debtor’s property.

Unlike corporations that may be liquidated and deregistered so that they will cease to exist as a separate legal entity, individuals will eventually emerge from bankruptcy. Currently, the general rule is that a person will be discharged from bankruptcy three years from the date that he or she filed their statement of affairs. However, the period of bankruptcy may be extended to 5 years or even 8 years for non-compliance with the obligations imposed on a bankrupt. The bankruptcy may also be annulled (ended) prior to discharge in some situations.

Answered over 7 years ago   Legal disclaimer


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