Bankruptcy is the legal process that controls the affairs of people who are insolvent. It therefore applies to individuals, including partners in partnerships.
If you are a director of a company that is insolvent, that does not mean that you will have to become a bankrupt. However, it is common for a director of an insolvent company to also become a bankrupt. That could come about in several possible ways such as because of:
* directors failing to act when they receive a Director Penalty Notice;
* personal guarantees – our page A personal perspective for directors discusses this;
* personal liability resulting from Insolvent Trading legislation;
* some other order given by the Court – see our page Key legal provisions for directors;
* directors loan accounts having to be repaid.
At Restructuring Works we spend a lot of time advising directors about their personal financial position. We do that because it is of no use to save a director’s company if that director has to become bankrupt and looses the company anyway.
So if you are concerned about personal liability then CALL US NOW for CONFIDENTIAL FREE ADVICE on how to protect your personal financial position.
If you’d like to learn more about personal bankruptcy read on.
A person is declared bankrupt by the Federal Court. This may occur as a result of an application by a creditor or when a debtor files an application for their own bankruptcy. The process normally begins when a creditor serves a Bankruptcy Notice on a debtor. If the debtor fails to pay, then the creditor can apply to court for the Bankruptcy of the person.
Bankruptcy legislation provides procedures which allow for the fair and equitable distribution of the debtors property. A Bankruptcy is run by a private practitioner, being a Registered Trustee in Bankruptcy, or by the government representative who is called the Official Receiver.
Some of the effects of bankruptcy on an individual are that they:
* are obliged to attend a meeting of creditors and answer questions relating to past dealings and transactions;
* may be required to attend an Examination before a registrar and answer questions under oath;
* must surrender their passports and can travel overseas during bankruptcy only with the consent of the trustee;
* may be required to contribute part of their income to the bankrupt estate;
* must disclose that they are bankrupt when applying for credit;
* are prohibited from managing a corporation without the courts approval and prohibited from acting as a director of a company;
* are allowed to keep personal clothing and household furniture only up to certain limits;
* will receive automatic discharge three years after filing their Statement of Affairs.
A Trustee in Bankruptcy is required to investigate the affairs of a bankrupt. The Trustee in Bankruptcy is able to use a number of different provisions of the Bankruptcy Act to recover funds and assets from those that have dealt with the bankrupt in the period leading up to bankruptcy. Those powers include the ability to recover:
* property transferred at less than its proper value;
* property transferred with a view to depriving creditors of the value of those assets;
* payments to particular creditors that gave those creditors a preference over others;
* assets transferred to a spouse or accumulated in a company.
So if you are concerned about personal liability then CALL US NOW for CONFIDENTIAL FREE ADVICE on how to protect your personal financial position.
