Debt is a part of most lives – from housing to education, most adults will find themselves bound to some type of loan or debt. However, some may lose sight of their debt accruing and inch closer to bankruptcy.
Bankruptcy is a very specific arena in finance and law. Under s 61 of the Bankruptcy Act (“BA”), an application for bankruptcy can only be made where the debt has fallen due and is of at least $15,000.
While on the surface this may seem like a sizeable amount, a good percentage of the population rack up this debt within no time. It is only within circumstances where repayment becomes problematic that the concept of bankruptcy is raised.
Bankruptcy precludes creditors from making demands for repayment. Instead, repayment arrangements for bankrupts are tailored to their financial capabilities by an Official Assignee (“OA”) – who is a public servant tasked with supervising individuals throughout their bankruptcy – thus relieving you from the demands from your creditors.
This is, however, a small feature of bankruptcy. There are several other components that accompany that status which involve assets and monthly finances.
For instance, during bankruptcy, you will be required to make a certain number of monthly contributions (“target contributions”) to be eligible for discharge. Each contribution is meant to be a reasonable amount determined by the OA based on several factors: e.g. the income and credentials of you and your spouse (if any), your estimated household expenses and prevailing economic conditions.
The OA will also sell off your assets and distribute the proceeds amongst your existing creditors. If you conceal, dispose of, or abscond with such assets or falsify related records, you may be found criminally liable.
This means that you may be fined up to $10,000 and/or imprisoned for up to 3 years. Thus, you should fully disclose all your properties to the OA, even those that you may potentially own, and not attempt to quietly squander those assets.
There are many other features in filing for bankruptcy. Corporate insolvency is yet another arena within the confines of bankruptcy and liquidation laws.
Bankruptcy is not a trifling matter and while relieved from harassment of creditors, it is tethered to many conditions that severely alter the quality of one’s life. It is critical that we learn to manage our debt and understand personal finances.
In the event that bankruptcy is an inadvertent outcome, understands the protocols and procedures to be followed and the mitigating frameworks implemented to support you.
Stay safe, stay informed and remember – we recover broken promises 🙂