The decision to go bankrupt should only be taken after considering who can voluntarily enter bankruptcy and the advantages and disadvantages of doing so. Always get advice first to discuss if there are other options available to deal with debts.
To go bankrupt voluntarily, a person will need to complete the following forms:
- a debtor's petition; and
- a statement of affairs; and
- an acknowledgement as having read and understood the Prescribed Information [Bankruptcy Regulations 1996 (Cth) reg 4.11).
The value of the person's interests in assets must be shown. For example, jointly owned furniture valued at $2000 should be shown as a half-share worth $1000. Joint debts should be shown in full, because each joint debtor is fully liable for payment of the debt and the liability cannot be divided. For example, a joint debt of $3000 should be shown on each individual statement as $3000. For joint secured debts, use the total amount of the debt, less the value of the security, to calculate the deficiency or the equity in the asset. Each debtor is solely responsible for the deficiency, so this amount should be shown in full. If there is equity in the asset, this equity is shared and the amount should be halved to show the individual's share.
After completing the forms they can be filed personally with (or posted to) the Official Receiver c/- AFSA.
The Official Receiver will determine whether to accept or reject the Debtor’s Petition. The Official Receiver may reject a debtor's petition if:
- the petition does not comply with the approved form or does not contain the requisite information, or
- it appears from the information in the statement of affairs that, if the debtor did not become a bankrupt, the debtor would be likely to be able to pay all the debts specified in the statement of affairs, and at least one of the following applies:
- it appears from the information in the statement of affairs that the debtor is unwilling to pay one or more debts to a particular creditor or creditors, or is unwilling to pay creditors in general;
- before the current petition was presented, the debtor previously became a bankrupt on a debtor's petition at least 3 times, or at least once in the period of 5 years before presentation of the current petition. [Bankruptcy Act 1966 (Cth) s 55(3AA)]
Before the Official Receiver will reject a petition, the debtor will be contacted to obtain further information and advised of the intended course of action. A debtor can apply to the Administrative Appeals Tribunal for a review of the decision by the Official Receiver to reject their petition.
Where the Official Receiver accepts the forms, a bankruptcy number is allocated. The client is deemed to have been bankrupt from midnight of the night before. The bankrupt may be interviewed immediately or may simply be asked to provide detailed written information or documentation. Alternatively if a registered trustee has consented to act, the statement of affairs and interview of the bankrupt are usually arranged by the trustee even though the original statement of affairs, debtor’s petition, consent of trustee and acknowledgement that the Prescribed Information has been read still needs to be filed with the Official Receiver.
The trustee may ask for the bankrupt's passport and for copies of all contracts and documents relating to the debts. The trustee may also request information about the bankrupt's assets.
Depending on the assets which are available for sale and distribution among creditors, the trustee will make a number of decisions. If assets are of very low value, the trustee may ask the bankrupt to sell the goods personally rather than incur the expenses of finding a buyer. The trustee may even be prepared to accept less than market value where costs will be saved by not seizing and selling the goods.
Where the bankrupt wishes to retain the use of the goods, such as a car, a friend or relative may be prepared to make the trustee an offer. The trustee will almost always co-operate in these circumstances.
The content of the Law Handbook is made available as a public service for information purposes only and should not be relied upon as a substitute for legal advice. See Disclaimer for details. For free and confidential legal advice in South Australia call 1300 366 424.