Insolvency & Restructuring FAQs

During bankruptcy, you must request permission from your trustee to travel overseas. It's an offence to travel without written consent, and your trustee may ask for further details to consider your request.

Bankruptcy is a legal process where individuals declare their inability to repay debts. It allows for the discharge of most debts after a specified period, typically three years, but may involve the sale of assets and can impact credit ratings and future financial opportunities.

Bankruptcy can affect your ability to obtain future credit. If you apply for credit over a set amount, you must inform the credit provider of your bankruptcy. Additionally, your name will permanently appear on the National Personal Insolvency Index (NPII), a searchable public register listing insolvency proceedings in Australia.

Consequences of bankruptcy include:

• Your name permanently appearing on the National Personal Insolvency Index (NPII).
• Potential restrictions on overseas travel without trustee consent.
• Possible sale of certain assets to repay creditors.
• Impact on credit rating and future borrowing capacity.

A PIA allows for a flexible arrangement to settle debts without the formalities of bankruptcy. Unlike bankruptcy, a PIA does not automatically disqualify you from managing corporations, and you may retain control over your assets, subject to the agreement's terms.

Bankruptcy typically lasts for three years from the date you file your statement of affairs. However, this period can be extended if you fail to comply with certain obligations.

Most unsecured debts are covered in bankruptcy, meaning you no longer have to repay these debts. However, some exceptions include:

• Debts incurred after the date of bankruptcy.
• Debts not included in your statement of affairs.
• Unliquidated damages (e.g., a car accident where you were at fault but no court order has been made).
• Debts incurred by fraud.

A Personal Insolvency Agreement (PIA) is a legally binding arrangement between an individual and their creditors to settle debts without declaring bankruptcy. It involves appointing a trustee to manage the agreement, which may include paying part or all of the debts by instalments or a lump sum.

Personal insolvency occurs when an individual is unable to meet their financial obligations as debts become due. In Australia, this can lead to formal arrangements like bankruptcy or personal insolvency agreements to manage and resolve outstanding debts.

During bankruptcy, certain assets are protected, including:

• Household furniture and appliances.
• Tools of trade up to a certain value.
• Vehicles up to a certain value.

All other assets of value can be sold to repay creditors.

Yes, if a Deed of Company Arrangement (DOCA) is agreed upon, the company can restructure and continue operations, aiming for a better outcome than immediate liquidation.

In Australia, the primary corporate insolvency procedures include:

• Liquidation: Winding up the company's affairs and distributing assets to creditors.
• Voluntary Administration: Appointing an external administrator to assess options for the company's future.
• Receivership: A secured creditor appoints a receiver to recover owed funds.

Employees may be entitled to outstanding wages, leave, and other entitlements. If company funds are insufficient, the Fair Entitlements Guarantee (FEG) scheme may provide assistance.

Voluntary administration involves appointing an external administrator to assess the company's financial situation and recommend options, such as restructuring or liquidation, to maximize returns for creditors.

Liquidation is the process of winding up a company's financial affairs, selling its assets, and distributing the proceeds to creditors. This process leads to the company's dissolution.

Directors must act in the best interests of creditors, avoid insolvent trading, and ensure accurate financial records are maintained. Failure to comply can lead to personal liability.

A liquidator administers the winding-up process, including:

• Collecting and selling company assets.
• Investigating company affairs.
• Distributing proceeds to creditors.
• Reporting to ASIC on any director misconduct.

Receivership occurs when a secured creditor appoints a receiver to take control of the company's assets to repay the secured debt. The receiver's primary duty is to the appointing creditor.

Corporate insolvency occurs when a company is unable to pay its debts as they become due. This financial distress can lead to formal insolvency procedures to address the company's obligations.

The main types of liquidation are:

• Creditors' Voluntary Liquidation: Initiated by insolvent company's shareholders or creditors.
• Members' Voluntary Liquidation: Initiated by solvent company's shareholders.
• Court Liquidation: Ordered by the court, usually upon a creditor's application.