Bankruptcy Lawyers in Melbourne

Read this before you sign a debtor’s petition

You cannot pay what you owe, a creditor is threatening a bankruptcy notice, or someone has told you bankruptcy is a fresh start. Before you act on any of that, find out what it actually costs. Bankruptcy runs for three years and one day, and while it runs a trustee controls your assets and you cannot be a company director. Your name then sits on the National Personal Insolvency Index permanently. Bankruptcy is the personal end of what our insolvency lawyers do, and it is the one process that follows a name instead of a company.

For some people it is still the right deal, and we will say so plainly when it is. Plenty of others do better out of a debt agreement, a personal insolvency agreement or a negotiated settlement, all of which cost less and leave more intact. Ring 1800 130 120 with your real numbers and one free call will tell you where you sit.

What bankruptcy takes, and what it leaves you

During bankruptcy your divisible assets vest in the trustee. That includes equity in your home, investment properties, and money you inherit or win during the three years. You keep ordinary household goods, most superannuation, tools of trade up to an indexed limit and a vehicle up to an indexed limit. If your after-tax income runs above the indexed threshold, just over $74,000 for a person with no dependants (it rises with each dependant and is re-indexed every March and September), you pay half of every dollar above it to the trustee. Overseas travel needs written consent. Your credit report carries the bankruptcy for five years from the start or two years after discharge, whichever ends later. If a separation is running at the same time, the trustee’s claim and the property settlement are pulling at the same pool of assets, and neither can be worked out in isolation from the other.

What bankruptcy actually costs varies enormously from one person to the next. Someone with no equity in a house, an average income and no directorship gives up very little by going bankrupt. A director with a family home and $90,000 of income gives up the equity, the board seat, and a slice of every pay rise for three years.

If a creditor is pushing you towards it

A creditor with a judgment debt of $10,000 or more can serve a bankruptcy notice. You then have 21 days to pay, settle or apply to set the notice aside. A company in the same spot is served a statutory demand instead, on its own 21-day clock, so a director whose business is also under pressure can find themselves holding one of each. Do nothing about the bankruptcy notice and you have committed an act of bankruptcy, which lets the creditor ask the court to make you bankrupt.

Those 21 days are the best negotiating window you will get, because most creditors would rather take a payment plan than fund a bankruptcy where they share with everyone else. A notice like this arrives at the end of a commercial debt recovery file, after demands and a judgment have failed to produce payment, so the creditor serving it has already spent a good deal chasing you and would usually rather be paid than be proved right. We open that negotiation the week the notice lands. If the debt itself is disputed, our debt recovery team fights it on the merits.

The alternatives, honestly

A debt agreement is a binding compromise where you pay an affordable percentage of your unsecured debts over up to five years. It is only open to you if your debts, assets and after-tax income sit under the indexed limits, and it still shows up on the insolvency register and your credit file, so it is not consequence-free. A personal insolvency agreement has no eligibility caps. A controlling trustee takes over briefly, creditors vote on your settlement offer, and if they accept it you avoid bankruptcy altogether, which suits people with assets worth protecting and access to a lump sum, often from family. An informal arrangement, documented properly, stays off the insolvency registers, but it only binds the creditors who agree to it.

If your problem is a company debt you guaranteed rather than personal spending, start with our director liability page, because attacking the guarantee is sometimes cheaper than any insolvency process.

Partners never had that separation to begin with, since the firm’s debts are personally theirs, and the arguments over who carries what on the way out usually play out as partnership disputes well before anyone reaches an insolvency process. Sole traders are exposed the same way. When a builder trading under their own name goes down there is no builder liquidation to run, only a bankruptcy, and the homeowners and subbies chasing the money join the queue as ordinary creditors.

What one call sorts out

Call 1800 130 120 or use the form on this page. Have a rough list of debts, assets and income ready. We tell you what bankruptcy would actually cost you, which alternatives your numbers allow, and what we would do in your position. If a bankruptcy notice is already running, call today, whatever day it is.