The Bankruptcy Process

Bankruptcy occurs when an individual does not have enough money/assets to pay creditors or debt that is owed. In the event where an individual is unable to pay their creditors and debts owing, they must go through a formal process to be deemed eligible for bankruptcy. Voluntary bankruptcy means that the individual has voluntarily and legally declared themselves bankrupt.

1. The first step in Bankruptcy Applications is for the creditor (the person owed the money) to obtain a Bankruptcy Notice against the debtor (the person who owes the money). A bankruptcy notice is a formal notice of demand requiring a debtor to pay a debt.
   
    

2. A Bankruptcy Notice application is made with the Insolvency and Trustee Service Australia (ITSA). The debt that forms the basis of the application must be a final judgement or order for at least $5000.00 that is less than six years old. If the application is successful, ITSA will issue endorsed copies of a Bankruptcy Notice, which will then need to be served upon the creditor.
   
    

3. To effectively serve the debtor, service of the Bankruptcy Notice needs to be done in person. If personal service is attempted and cannot be completed the creditor may make an application to the Federal Magistrates Court of Australia to seek substituted service orders. These orders may allow the creditor to mail the Bankruptcy Notice to the creditor's home address / place of employment.
   
    

4. Upon being served, the debtor has 21 days from the date of service to either make an application through the Federal Magistrates Court of Australia to have the Bankruptcy Notice set aside if they are of the opinion that it should not have been issued, or to pay the debt.
   
    

5. If the debtor fails to respond or pay the debt after 21 days of being served, the creditor may commence formal Bankruptcy proceedings against the debtor in the Federal Magistrates Court of Australia.
   
    

6. The commencement of the Bankruptcy proceedings in the Federal Magistrates Court of Australia requires the creditor to file a creditor's petition. Once presented to the Court for filing the court will set a date for a hearing of the Petition. The Petition will then need to be served on the creditor.
   
    

7. To effectively serve the debtor, service of the creditor's petition needs to be done in person. If personal service is attempted and cannot be completed the creditor may make an application to the Federal Magistrates Court of Australia to seek substituted service orders. These orders may allow the creditor to mail the creditor's petition to the creditor's home address / place of employment.
   
    

8. The hearing of the Petition usually occurs 6 weeks after it has been filed. At the hearing, the court may allow the Petition and therefore make what is known as a sequestration order, which means the debtor is made bankrupt.
   
    

9. If prior to the hearing date the parties have settled the debt the court may at the hearing of the petition order the petition to be dismissed.
   
    

10. At the hearing of the petition if the creditor has been unable to serve the debtor the court may order the matter be adjourned to allow the creditor to make a substituted service application (as mentioned above). In addition if the parties are negotiating settlement or the debtor is able to demonstrate to the court that they require more time to seek possible legal representation or more time to enable them to fully furnish the debt, the court may grant an adjournment.

Here at The Quinn Group, our dedicated team of lawyers and accountants can assist you with advice and assistance for your bankruptcy needs. If you find that are unable to pay your debts and you feel that bankruptcy may be an appropriate option for you, contact us now by submitting an online enquiry form or call 1300 QUINNS or on +61 2 9223 9166.