What are some frequently asked questions about bankruptcy
Knowledge of the legal framework can give you back a sense of control
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During the period of bankruptcy, you cannot act a director of a company or trade under a business name. However you can trade under a business name if you make clear to consumers that you are a bankrupt.
You must hand over your passport and cannot travel overseas without the permission of the bankruptcy trustee.
You cannot take out a loan or credit of more than the indexed amount. If you intend to take out more than the indexed amount, you must disclose to the lender your bankruptcy.
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The short answer is yes. However, a contribution from any money you earn that exceeds an indexed amount per annum must be paid into the bankruptcy estate, to be used to the benefit of creditors. Examples of income can include personal income, benefits, payments and benefits provided by third parties, superannuation payments and trust payments or benefits.
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When you are made bankrupt, a bankruptcy trustee takes control of your divisible property, that is, property which can be sold and divided among your creditors.
Some property is not included, such as:
Household items and clothing;
tools of trade up to an indexed value;
a vehicle up to an indexed value;
life insurance or endowment (some limitations may apply);
compensation payments; and
sentimental items.
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The bankruptcy trustee has powers to investigate transfers, sales or gifts of property made by you prior to bankruptcy. There are important laws which govern what you can, and importantly, should not do with property, depending on the circumstances. This might depend on a number of factors, including but not limited to the purpose, the value and any impropriety. A bankruptcy trustee does have the power to retrieve back property.
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The bankruptcy usually ends 3 years after filing the statement of affairs. Having said this, the bankruptcy trustee can continue to administer the estate for some time after this period.
A bankruptcy term can be extended by up to 5 years by an application of the bankruptcy trustee.
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An annulment has the effect of there having been no bankruptcy at all. An annulment of bankruptcy can be obtained in limited circumstances:
by court order, if it can be shown that the bankruptcy order should not of been made;
the creditors and administration costs have been paid in full;
the creditors accepted what is known as a “section 73” proposal.
Contact us to discuss your matter
Liquidation
When a company is placed into liquidation, this generally occurs because the company is insolvent and because the company has no realistic chance of resolving its financial distress and becomes necessary to avoid additional financial and legal risks. This is usually because the financial situation of the business is dire and there is no prospect of restructuring or salvaging the business. A liquidation should be a last resort, and there are opportunities to avoid such a consequence. Sometimes, your creditors will have the power to liquidate your company.
Insolvent Trading
if your company incurs a new debt at a time where the company is insolvent, or where it is reasonable to suspect that your company is insolvent or could become insolvent because, you and other directors could be engaged in insolvent trading. Learn about what this means and how to avoid this.
Voluntary Administration
Sometimes, risks of insolvency and liquidation might be avoided early via a corporate restructure or voluntary administration. A corporate restructure can involve making changes to the legal and operational set up of your company. For example, this might include changes to ownership, management, leadership, shareholders, operations & policy, employee structures & roles, among other things. Voluntary administration involves the appointment of a voluntary administrator with the view to formally restructuring or selling the business.
Personal Bankruptcy
Sometimes, the way your business is structured, or, the contract you have signed for your business, might leave you personally vulnerable. this means that if your business is struggling, some creditors might look to you personally for payment which could expose your personal assets. Creditors might commence legal action against you personally if your business cannot afford to pay, or if it is liquidated. This might lead to a scenario where you are later exposed to bankruptcy proceedings. A bankruptcy proceeding means that a bankruptcy trustee might be appointed to take over your personal assets and sell them to pay off creditors. There are ways to avoid this scenario with early advice.
Understanding what things mean empowers you to make decisions. We help you make sense of the process, and the options.
Director Penalty Notices
When your company has failed to pay its taxation obligations, such as pay as you go withholding requirements (PAYG) or superannuation guarantee charge liabilities (SGC), the Australian Taxation Office (ATO) has the power to issue to directors of that company a Director Penalty Notice (DPN). A DPN will result in the directors of a company becoming personally and individually liable for any outstanding PAYG and SGC as well as any accumulated interest and penalties. All directors, including directors who have resigned, can receive a DPN notice and become personally liable.
There are two types of DPN notices: A Traditional Notice and a Lockdown Penalty Notice.
We have a rich understanding of what works, and, more importantly, what doesn’t
Not all advice in bankruptcy and insolvency is equal, and not all strategies are viable.
When your business or future is on the line, it can be hard to know who you can rely on for help. Cost also plays a part. We know that, sometimes, it can be hard to know who to trust. That is why we are open, clear and straight forward with you when it comes to what works, and what doesn’t work. There are no quick fixes to insolvency, regardless of what you might read elsewhere. Countless court cases attest to that. What you need is thoughtful and carefully evaluated advice that looks at the full picture.
Our experience is important because we have a deep understanding of your challenges. We know, and are qualified to give you advice on, how bankruptcy and insolvency laws operate, what strategies actually work and how these can effect your planning. We will work with you to produce a plan which is commercially and legally viable. We do not gamble with your business, or your future.