Bankruptcy overview – From a trustee’s perspective

Hello, I’m Alan Nicholls and I’m a Registered Bankruptcy Trustee, Company Liquidator, and a Chartered Accountant. So that you can have the chance to read some right information, I’d like to tell you about bankruptcy from my perspective.

People tell me every day that they want to pay their debts, but just can’t.

They tell me that they’ve tried to keep up with the minimum repayments required, they’ve talked to their creditors to see what other relief was available, they’ve accepted whatever period of grace was offered to enable them to get themselves into better shape, and they’ve tried and tried and tried and tried and are getting nowhere.

In a lot of cases their circumstances have just changed, and that’s why they are now in debt.

So, I very often recommend to them that they consider declaring themselves bankrupt. I tell them that bankruptcy will give them the chance to start a new life, in most cases completely debt free, and that if they wish, they can start this new life…..now.

What Happens Once You Become Bankrupt?

By becoming bankrupt, and it can generally happen within about 10-14 days, you’ll first get a Bankruptcy Trustee. Perhaps you’ll choose me. We’ll go into that if you ask.

Almost all of your debts, and most times it is all of your debts and liabilities (in the language of a Bankruptcy Trustee they are known as provable debts), simply then become owing by your bankrupt estate, not by you anymore, so you become debt free or almost debt free.

The exceptions are monies owing to Centrelink, Child Support, HECS Debt, and what are known as Court Imposed Fines, and finally, debt incurred by Fraud.

And if you want to keep an asset that is allowed, like a car, and later on we’ll talk about your house too, then of course you must continue to pay for it. This sort of debt is called Secured Debt.

I’ll explain what happens to them shortly, right now I want to tell you what happens to the majority of debt that I come across like credit card debt, tax debt, store card debt, phone debt, personal loan debt, and the like. It’s called unsecured debt, and it’s the easy to get dead end sort of debt that burdens people the most.

When you go bankrupt this sort of debt is simply cancelled immediately as far as you are concerned, you personally don’t owe it anymore, and never will, as it simply becomes debt owing by your bankrupt estate, and over the next three years it is sorted out by your Registered Bankruptcy Trustee. But let me stress, because I sometimes hear that you’ve been told otherwise, from day 1, as soon as you become bankrupt, you do not owe it any more.

If you have been paying any of this sort of debt by direct debits from your bank account, go to the bank and cancel these arrangements.

This is an extremely important point to note and digest as with both the alternatives to bankruptcy, notably Debt Agreements and Personal Insolvency Agreements you are not released from your debts until the final repayment instalment is made. Often time with Debt Agreements that could be 5 years down the track, or longer.

That is too long for most people and their families to stay in debt and to be broke and miserable.

Once the bankruptcy is in place then your bankruptcy number and date of bankruptcy are recorded on the government’s database which is known as the National Personal Insolvency Index, the NPII. You are there forever and it is a public document and accessible by payment of a fee. Only on rare occasions do I hear of it being accessed.

You get an important black mark on the database of the commercial credit rating agencies, and it’s there for 5 years. That’s the credit rating to worry about. This is the one where a lot of the people who ring me up are already listed as having bad credit risk.

Once you are bankrupt your bankruptcy trustee will write to all creditors (and your present bank) to let them know of your bankruptcy and to ask them to contact his office regarding the likelihood of your debt being repaid. Your Bankruptcy Trustee can then provide them with some certainty about their prospects of this happening.

Once you’ve gone bankrupt your creditors are not to contact you again by phone, letter or a knock on your door about this debt, and they can’t reappear again in 3 years’ time.

Your bankruptcy is not advertised in a newspaper.

Once you become bankrupt your trustee will move to secure any assets that can now be part of your bankrupt estate, and he/she will commence administering the bankrupt estate.

You can now start putting the stresses and uncertainty of being unable to repay your debts behind you, and so now get on with life.

There are other options apart from bankruptcy that are available to you and these are outlined further on in this website, but in most cases it is my opinion that bankruptcy provides you with the neatest and most effective solution, as bankruptcy provides an immediate release from the liabilities, and most importantly, it simply recognises that we are all human beings.

Bankruptcy also provides you with the opportunity to earn a minimum level of cash in hand income, which is always over $1,000 a week, and to be able to keep certain property so as to ensure that you can live fully.

Once a person gains the protection of bankruptcy they can change their focus towards regrouping, living their life and recovering from the trauma of extreme financial distress. I’ve seen a happy and productive life happen again. People are able to regain their self-esteem.

The Bankruptcy Option explained.

The purpose of the Bankruptcy Act is to provide a legitimate humane solution for persons who are unable to pay their debts, without regard as to whether the debts are business or personal.

Thousands of what could be generally termed ordinary people choose to utilise bankruptcy every year. You don’t have to be in business to declare yourself bankrupt, unresolvable debt does not discriminate. It can impact anyone without regard for whether they are or are not in business, the type of work they do or where they live.

Debt can also be caused by a relationship breakdown, unemployment or under-employment, sickness, a business failure, debt as the result of a personal guarantee, an act of nature, structural change within an industry, and whether you’ll admit it or not, sometimes by excessive personal expenditure.

There would be others as well but these are the main ones that I see. I just wanted you to know that a bankruptcy claim works the same way, regardless of the reason.
If you’d like to talk to me about bankruptcy and where it sits with you then call me on 1300 060 122 or send me an email at helpdesk@nichollsco.com.au Also, save my website www.nichollsco.com.au so that you can come back and read much more, not only about bankruptcy.

Sometimes there is confusion about businesses going “bankrupt”. Only individuals can claim bankruptcy.

There is a different set of laws and procedures if a Pty Limited or a Limited company is unable to pay their debts, they mostly go into Liquidation. (I am also a Registered Company Liquidator)

If a director has signed a personal guarantee and they later cannot honour that guarantee then this debt will be cancelled on the bankruptcy of that director, and so life can go on.

How does a person become bankrupt?

To obtain the protection of bankruptcy you must fill out 2 forms, a Debtor’s Petition and a Statement of Affairs. If you think that you would feel comfortable and able to correctly fill in these forms yourself then they can be downloaded from here

Alan Nicholls’ No Obligation Help Desk

Nicholls & Co provide a free, no obligation ‘help desk’ for people considering bankruptcy – we discuss and explain bankruptcy and answer questions for people considering bankruptcy. The Nicholls & Co help desk can be accessed at Ph; 1300 060 122 or helpdesk@nichollsco.com.au . Alan Nicholls, Registered Trustee in Bankruptcy is also available to answer your questions to enable you to assess whether bankruptcy is right for you