Bankruptcy Notice – QLD

Insolvency or bankruptcy – what are your options?

Should you find yourself in a position where you cannot repay your debts, you may have some options to weigh up to determine the best way forward. This could include declaring bankruptcy or insolvency, however, the first step in taking control of the situation is to ask for professional help. Here we help to explain the differences between these two options and the impacts they might have on you in the future.

What is bankruptcy and what does it mean for me?

Bankruptcy is the where you are unable to pay your debts, so you are legally released from these. While declaring bankruptcy can release you from most debts and provide quick financial relief, you may carry the consequences of declaring it for years to come. For example, it may affect your ability to get credit, travel overseas or gain employment.

You can apply to become bankrupt voluntarily if you have a debt of any amount you cannot pay. When you are a voluntary bankrupt, a trustee will manage your financial affairs for you.

When you become bankrupt, you can typically keep household goods and personal effects like a television, computer and furniture of reasonable value, but you can expect to lose items of more significant value such as real estate, cars, and savings over $1,000.

Your bankruptcy will appear on your credit report for five years and on a public record known as the National Personal Insolvency Index for life, therefore it’s important you consider all of advantages and disadvantages of bankruptcy if you are thinking about this option to deal with debts you cannot pay.

What is insolvency and what does it mean for me?

Similarly, insolvency is when a company is unable to pay its debts when they are due for payment. Insolvency is usually categorised into three areas:

  • Voluntary administration: When an independent and suitably qualified person takes full control of the company to try to work out a way to save either the company or its business.
  • Liquidation: When an independent and suitably qualified person takes control of the company so that its affairs can be wound up (closed off) in an orderly and fair way for the benefit of all creditors.
  • Receivership: A step in which a trustee is legally appointed to act as the custodian of a company’s assets or business operations and is done to restructure a company and avoid bankruptcy,

What is important to know is that you can be insolvent without being bankrupt.

Think of insolvency as the trigger for financial hardship. If you can’t pay your monthly bills because you don’t have the money then and there, you could ask for a short-term loan to help get you by for the month. If you get one, the insolvency goes away. Therefore, there are solutions for resolving insolvency, including borrowing money or increasing income so that you can pay off debt. However, usually the longer you are insolvent, the worse things will become as your expenses start to become more and more unmanageable. This might mean, you may need to declare bankruptcy.

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