Every situation is different and there are a variety of reasons a person may become bankrupt, from personal relationship breakdowns, health concerns, loss of employment, debt issues and more.
There are two distinct ways you can become bankrupt:
One – presenting your debtor’s petition, referred to as voluntary bankruptcy.
If you are unable to pay your debts and cannot come to suitable repayment arrangement with your creditors, you may choose to voluntarily lodge a petition to become bankrupt.
Two – a creditor (someone you owe money to) makes an application to court to make you bankrupt, referred to as involuntary bankruptcy.
If you are unable to pay your debts and have been unable to enter into an arrangement with your creditors and you haven’t voluntarily made yourself bankrupt, a creditor to whom you owe $5,000 or more may apply to the court to have you made bankrupt.
Bankruptcy provides the mechanism for the following objectives to be met:
• Provides relief to the Debtor by enabling them to be released from the burden of their liabilities and opportunity for a fresh start (after due process).
• Provide equitable distribution of essentially all the Bankrupt’s assets to all Creditors; and
• Enable an investigation of the Bankrupt’s affairs and the circumstances leading up to their insolvency.