You can become bankrupt by making your own application (debtor’s petition) or by one of your creditors applying to the court for an order (sequestration order) that you be made bankrupt (creditor’s petition).
We recommend you make your own application for bankruptcy because it offers several positive advantages, such as:
- A faster resolution to your financial problems.
- Your stress levels will be lower if you make the decision rather than waiting for someone else to decide the timeframe for you.
- Once you realise bankruptcy will help solve your financial problems, the sooner you can get on with your life – going to work with your pay protected for you and your family.
- If bankruptcy is your choice, you can ask a trustee to take care of your bankrupt estate. You do not have this option for a creditor’s petition.
- The protection of bankruptcy means the creditors’ phone calls will stop. they can talk to the trustee to find out where they stand and how much they are likely to recover or whether they should write off their debt.
- The creditor does not incur the cost of making application to the court for your bankruptcy.
You must owe a creditor more than $5000 (subject to CPI adjustment) before they can petition for your bankruptcy.
However, it’s important to remember that creditors are not subject to a strict timeframe. They can make an application for your bankruptcy at any time within the statute of limitations. If they’re not in a hurry, your financial problems could go on for years.