You may be thinking, “This is it – the end. I will have to declare bankruptcy”. The hard truth is – perhaps. But there are alternatives you may need to explore or consider before making the final decision to go bankrupt.
Aside from filing for bankruptcy, there is an optional proceeding available where an individual (debtor) can avail himself or herself so as to have ‘breathing space’ and have some of the pressure relieved for a period of time before making any definitive decisions.
To take advantage of that ‘breathing space’, you can file a Declaration of Intention to Present a Debtor’s Position. In other words, you officially announce you are considering declaring yourself bankrupt.
What is the effect?
Essentially, that means everything ‘freezes’. Your debts do not have to be paid for that period of time (21 days), any proceedings are stopped – the overwhelming pressure stops for a short time to allow you to explore alternatives to bankruptcy with your creditors.
So what kind of alternatives are available?
Alternatives may include going to meet with your creditors and telling them the exact problem you face. This may lead to striking an agreement with them where you may end up paying less or they wait for a longer period of time for their debts to be repaid.
To obtain the moratorium (a period of time where financial debts freeze):
- Firstly, a debtor must present to the Official Receiver a Declaration of Intention to Present a Debtor’s Petition, a Statement of the Debtors Affairs and a copy: s54A, AFSA Form 5. This can be found at https://www.afsa.gov.au/resources/forms/forms-for-declaring-bankruptcy.
- Before the Official Receiver accepts the petition, he or she is legally obliged to present to you Prescribed Information that outlines the alternatives to bankruptcy that you should consider, as well as the consequences of going through with bankruptcy. You should consider these factors seriously before continuing.
- If a declaration is in order, the Official Receiver is then able to accept the declaration and the 21 days automatically begins. The Official Receiver also gives a copy to the debtor and notifies creditors disclosed in debtor’s statement of affairs. This means, any court cases being pursued must be stopped and any debts owed frozen temporarily.
- You may wish to shorten the 21 days if you have made up your mind. This can be done by filing the petition earlier.
- If in 21 days, you make a deal with your creditors and the time period elapses, you can continue with your affairs accordingly without filing for bankruptcy.
However, if you are unable to succeed with your creditors, you should seek a Bankruptcy specialist lawyer to assist you with the procedure for filing a petition to declare bankruptcy. For more information on the process of filing for bankruptcy, please read the “What is Voluntary Bankruptcy?” article.
The stresses and complexity of bankruptcy can be overwhelming. If you require assistance with this process, please do not hesitate to contact LegalVision for a consultation.