Bankruptcy, Personal Insolvency Agreement or Composition, which one is right for me? The Answer? – It depends

We previously talked about Bankruptcy and Personal Insolvency Agreements. Depending on the circumstances, there are options available under the Bankruptcy Act that are more applicable to you and your individual financial position than you may realise.

We previously talked about Bankruptcy and Personal Insolvency Agreements.

Depending on the circumstances, there are options available under the Bankruptcy Act that are more applicable to you and your individual financial position than you may realise.

Those facing personal financial difficulties that may be attributable to business failure, relationship breakdown, adverse litigation or other reason need to carefully consider the most appropriate way to deal with actual or impending insolvency.

Depending on your stage of life, employment prospects including Company directorships, and your ability to access funds from an external source, there are options to consider.

As a bankrupt you are subject to certain restrictions, usually for three years, including overseas travel, inability to be a Company director, income contribution responsibilities and ongoing obligations to keep your Trustee informed of your changing circumstances. Your bankruptcy will be recorded on the National Personal Insolvency Index (“NPII”) and you will also continue to be responsible for child support obligations.

As a debtor, who is subject to a Personal Insolvency Agreement, you will be subject to the terms of that Agreement, which could span several years and contain ongoing obligations to your Trustee and creditors. You are also still considered an Insolvent Under Administration which means like Bankruptcy you cannot be a Company director for the term of the Agreement. Again, your Personal Insolvency Agreement will be recorded on the NPII.

There is also a third option available depending on your circumstances. This involves an arrangement with your creditors, called a Composition. This is a process available after bankruptcy, that enables you to have creditors vote on a proposal that allows you to annul your bankruptcy from the time the resolution of creditors for the annulment is passed. You will no longer be subject to the constraints imposed. Whilst your name will still appear NPII, the record is updated to reflect that the bankruptcy has been annulled.

For a confidential discussion regarding these options please contact:

Henry Kazar, Principal, Cathro & Partners, Brisbane

Ph – +61 2 9189 1723

Email – henry.kazar@cathropartners.com.au

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