If you owe more than $50,000 in unsecured debt but can make some payments towards your debts, then a proposal may be accepted by your creditors. Once your creditors have agreed you need to get the approval of the court. Your proposal is administered by a registered insolvency practitioner, not the Assignee.
If you owe more than $50,000, Bankruptcy is your only option. Bankruptcy is the most serious option. You can apply for Bankruptcy yourself, or your lender can ask the court to make you bankrupt to get back some of the money you owe.
Bankruptcy is also your only option if you have been accepted into a No Asset Procedure or Bankruptcy before. It lasts for three years from the date you complete a statement of affairs (a document listing your income, spending, debts and assets). If you apply for Bankruptcy yourself, a statement of affairs is part of your application.
Bankruptcy lasts for three years. After this your name stays on the Insolvency Register for four more years.
If your lender makes you bankrupt, you still need to fill in a statement of affairs. The three-year time period doesn't start until you fill this in and are accepted by ITS.
Do it online(external link) — Insolvency and Trustee Services
Bankruptcy has a big impact on your life. In addition to the effects of insolvency listed above, this includes:
- Loss of assets: Savings, vehicles, properties, shares, are no longer yours. These can be sold to help repay your debts.
- Loss of financial freedom: Control of your day-to-day budgeting and living costs is still yours, but your spending is closely monitored. They might get you to make regular payments to your lenders. If you inherit money, win a prize or get a pay rise, you must tell your supervisor. This money will go towards your debt.
- Work restrictions: You need permission from your supervisor if you want to be self-employed, run a business, or work for a family member.
- Travel restrictions: You need permission to travel overseas, including on holiday.
- No new student loans: An existing student loan will be included in your Bankruptcy debt. You cannot take out a new student loan until your Bankruptcy ends.
- No rights to take legal action: Any legal action needs to go through your Official Assignee, the official person who looks after your bankruptcy.
Who it's for
If you owe more than $50,000, Bankruptcy is the only insolvency option.
What happens to the debt
Once you are in an insolvency procedure, lenders cannot ask you for payments. When the procedure ends, all debts in your name are released.
Not all debts are included child support, court ordered fines and reparation must still be paid. Unlike NAP or DRO, Bankruptcy does include your student loan.
During Bankruptcy you can keep:
- money up to $1,300
- tools needed for your work, eg a builder can keep hammers, saws and drills
- a vehicle worth up to $6,500
- necessary household furniture and belongings, eg couches, kitchenware
- items on hire purchase, if you keep up with payments.
Applying for insolvency
If you want to find out more about insolvency, talk to Insolvency and Trustee Services about the process and what you might qualify for.
If you do want to apply, follow these steps.
- Register: Create an online account with Insolvency and Trustee Services.
- Activate your account: Set up your user name and password.
- Apply online: Fill in an application form for one of the three insolvency options.
Registration(external link) — Insolvency and Trustee Services
Budget calculator: The online application includes information on your debts, income and expenses. It's a good idea to calculate your numbers beforehand. A budget calculator helps you figure out where your money goes, and how much you can afford in repayments.
Budget calculator(external link) — Insolvency and Trustee Services
Debt Repayment Order calculator: If you're applying for a Debt Repayment Order, use the DRO calculator to see how long it will take to pay off some or all your debt. For example, compare how long it will take to pay off 50% of the total debt at $50 a week, or 100% of the debt at $80 a week.
Debt Repayment Order calculator(external link) — Insolvency and Trustee Services