Debtor’s Petition

There is no minimum amount that has to be owed before a debtor can file a petition for bankruptcy. In order to file for bankruptcy a debtor must complete three documents:

  • a debtor’s petition for bankruptcy; and
  • a statement of affairs

All documents can be obtained from the Australian Financian Security Authority (AFSA) office or website as well as a ‘prescribed information’ booklet.

Upon completion of the documents the debtor must submit them within 28 days of signing to the Official Receiver at the Office of AFSA, email the documents or send them to AFSA by post. Information on the process is available on the AFSA website.

When the Official Receiver receives the petition and allocates a bankruptcy number, the debtor becomes bankrupt. The bankruptcy takes effect from midnight of the night before the petition is accepted.

Free assistance is available from financial counsellors to assist in the completion of the statement of affairs. Financial counsellors will also be able to assess whether options other than bankruptcy may exist. See the Contacts and Resources section for details of financial counsellors in Tasmania.

Following lodgement of documents with AFSA and once the debtor is declared bankrupt, the trustee may ask that they attend an interview. Consumer bankrupts with no assets will generally not be required to attend such an interview. At this interview, the trustee may require of the bankrupt that they provide copies of contracts ad other documents relating to the debts. They may also ask that the bankrupt hand over their passport. Generally, these measures will not be required of a consumer bankrupt with no assets.

Creditor’s Petition

If a debtor owes $5000 or more to a creditor, the creditor is able to enforce the debt by taking bankruptcy proceedings against the debtor. If a debtor has many debts which cannot be paid in full, it is sometimes advisable to go into bankruptcy voluntarily, or to make formal arrangements, short of bankruptcy, to consolidate all the debts with creditors. In order for a creditor to begin bankruptcy proceedings, the creditor must file a creditor’s petition in either the Federal Court or the Federal Circuit Court.

The first step requires that the creditor have a court judgment against the debtor indicating that there is debt of greater than $5000 owing to them from the debtor. The creditor must then obtain a bankruptcty notice from AFSA demanding payment of money owed within 21 days. Failure to pay within that time then allows for a creditor to petition the court, as failure to pay is an act of bankruptcy.

If a bankruptcy notice is served on a debtor and they are unable to comply with the notice within the time prescribed, the debtor can apply to the court or to the Registrar for an extension of time. This extension of time however will only be granted if the time for compliance has not expired; and either:

  • proceedings to have the judgment or order set aside have been instituted; or
  • an application to set aside the bankruptcy notice has been filed with the Registrar (ss41 and 6B of the Bankruptcy Act 1966 (Cth)).

The debtor will be given an opportunity to be heard at a bankruptcy hearing. At the hearing of the creditor’s petition the creditor must establish that the debtor committed an ‘act of bankruptcy’ within the six month period preceding the petition being filed in court. An ‘act of bankruptcy’ is an action of a debtor that shows an inability to pay their creditors. Section 40 of the Bankruptcy Act lists over 20 actions that are considered acts of bankruptcy. The most common act of bankruptcy used by creditors is a failure to comply with a bankruptcy notice (s40(1)(g)). The court may then make an order (called a sequestration order) making the debtor a bankrupt.

If a sequestration order is made, the debtor must file a statement of affairs with the Official Receiver. This must be done in the prescribed form within 14 days of being notified of the bankruptcy and verified by affidavit. A copy must be given to the trustee (s54).

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