[BANKRUPTCY, INSOLVENCY & REHABILITATION PROCEEDINGS IN AUSTRALIA] 8
any new company, and creditors may be reluctant to extend credit. If a person is a director of two or more companies that have gone into liquidation, and if the return to creditors was less than 50%, the director can be banned from being a director of a company for 5 years. If the company was trading and incurring debts when the directors ought to have known the company was insolvent, the directors can be held personally liable for any such debts. Individuals Personal insolvency is called bankruptcy in Australia. A person who is unable to pay his or her debts, can declare themselves bankrupt, or a creditor can apply to the Court to bankrupt an individual, if they have a judgment against them for at least $5,000. Bankruptcy releases a person from unsecured debts and allows them to make a fresh start. Bankruptcy normally lasts for 3 years and 1 day. It can be extended for up to 8 years most commonly if a person’s bankruptcy Trustee has
reason to believe that the person has not been truthful about their affairs. When a person becomes bankrupt a Trustee is appointed. A Trustee is a person who manages your bankruptcy. A bankrupt person must provide details of their debts, income, and assets to their Trustee. Your Trustee notifies creditors that you are bankrupt - this prevents unsecured creditors from pursuing the debt. The trustee can sell certain assets to help pay debts. A bankrupt may need to make compulsory payments if their income exceeds a set amount. Bankruptcy is an option, but a person may also try to enter into a personal insolvency agreement, requiring 75% of creditors to agree. Bankruptcy may have serious consequences and prejudice a person’s ability to obtain credit, travel overseas or gain certain employment. Certain types of professions may be in jeopardy such as a lawyer or a builder.
ILN Restructuring & Insolvency Group – Bankruptcy, Insolvency & Rehabilitation Series
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