At Khoury Scott and Associates, our bankruptcy lawyers act on both sides on bankruptcy.

On the one hand, our team are able to assist clients who are experiencing financial difficulty to assess their options, voluntarily declare bankruptcy or compromise their debts in accordance with the provisions of the Bankruptcy Act 1966 (Cth) to prevent bankruptcy.

On the other hand, our lawyers also regularly act on behalf of creditors in enforcing their debts (judgements) against individual debtors by bringing a Creditors Petition in the Federal Court to have the debtor declared bankrupt by the Court.

What is Bankruptcy?

Bankruptcy occurs when an individual is insolvent (unable to pay their debts as and when they fall due) and has a trustee appointed to control their assets and finances.

The benefit to the bankrupt is that, by appointing a trustee, they are afforded protection from any further legal action being brought by their creditors. 

Having a trustee appointed also protects creditor’s interests by removing control of assets and finances from the bankrupt and into the hands of the trustee, who is then tasked to investigate the bankrupt’s affairs and manage the collection and distribution of assets to the creditors.

How does someone become Bankrupt?

As discussed above, an individual can voluntarily declare themselves bankrupt by lodging a Debtor’s Petition and a Statement of Affairs either with the Official Receiver or a Registered Trustee.

Alternatively, a person can be made bankrupt by a creditor lodging an application (Creditors Petition) with the Federal Court to have the debtor declared bankrupt.

How long is a person Bankrupt for?

Typically, the term of bankruptcy is 3 years and 1 day from the date the bankrupt submits their statement of affairs to their trustee. However, there are exceptions which would allow the trustee to lodge an objection to automatic discharge and extend the bankruptcy.

This typically occurs where a bankrupt fails to submit documents, answer questions or otherwise cooperate with the trustee.

What happens if I am made Bankrupt?

During bankruptcy a bankrupt:

  • Cannot act as a company officer
  • Cannot trade under a registered business name (that is not their own name) without advising people that they are a bankrupt
  • Must make available all divisible personal assets for the trustee
  • Must provide all books and records, financials, statements and otherwise (including in relation to related entities, companies and trusts of which the bankrupt is, or has been involved in) which the trustee so requires
  • Must not incur credit over the indexed amount without advising lenders that they are bankrupt
  • Are limited in travelling overseas
  • Have an obligation to surrender their passport and seek consent from the trustee to be able to travel outside of the country

How Khoury Scott and Associates can help you

For Creditors Owed Money

  • Obtaining Judgement against your debtors for amounts owed to you plus interest and costs
  • Issuing a Bankruptcy Notice
  • Handling the Creditors Petition process in the Federal Court and seeking orders that the debtor be made Bankrupt
  • Liaising with the bankrupt’s trustee to ensure your debt is accounted for in the bankruptcy

Whether you are a debtor or a creditor, our team of bankruptcy lawyers are able to help.

For Individuals In Financial Hardship

  • Providing advice on the options available
  • Preparing a Part IX Debt Agreement
  • Preparing a Part X Personal Insolvency Agreement
  • Negotiating payment arrangements or reduced payments with creditors
  • Voluntarily declaring bankruptcy
  • Defending bankruptcy proceedings

Dispelling Major Bankruptcy Myths

  • 1

    You CAN earn as much as possible

    There is no limit on the amount of money a bankrupt can earn. The only effect bankruptcy has on an individual’s income is that, if the amount earnt exceeds the indexed limit, the bankrupt must make income contributions to the trustee which is ultimately attributed to their estate).

  • 2

    You CAN keep a car

    A bankrupt is able to have a vehicle up-to the indexed amount. If the vehicle exceeds the indexed amount; however, is secured (by a loan/finance) for more than the value of the vehicle, then the bankrupt may be able to keep that vehicle if (1) the trustee disclaims the asset; and (2) the lender agrees to allow the bankrupt to keep the car; and (3) if the bankrupt meets their repayment commitments for the vehicle.

  • 3

    You MAY be able to keep your home

    A trustee has a claim to the equity in a bankrupt’s portion of property. If the home has little-to-no equity, then (1) the trustee may disclaim their right to the asset or may negotiate for the bankrupt to purchase the equity from them; and (2) the mortgagor (bank/lenders) may allow the bankrupt to keep the home, provided they bankrupt continues to meet the repayment obligations.