Debts you cannot pay: bankruptcy

When a creditor applies

Subject to the Act, no bankruptcy application can be made for a debt or debts unless, when it is made, the debt or total debts are at least $15,000 (or another sum the Minister substitutes by order in the Gazette), each debt is for a liquidated sum payable to the applicant creditor immediately, and the debtor is unable to pay it.

Insolvency, Restructuring and Dissolution Act s 311

For a creditor's application, a debtor is presumed, until they prove otherwise, to be unable to pay an immediately payable debt if, among other things, the creditor served a statutory demand for it at least 21 days earlier and the debtor has neither complied with it nor applied to the court to set it aside.

Insolvency, Restructuring and Dissolution Act s 312

The court may dismiss a creditor's application if, among other grounds, it is satisfied that the debtor is able to pay all their debts, or that the debtor made an offer to secure or compound for the creditor's debt that the creditor unreasonably refused, and that accepting it would have required the application to be dismissed.

Insolvency, Restructuring and Dissolution Act s 316(3)

Applying yourself

An individual debtor can make a bankruptcy application against themself. It must be in the prescribed form, supported by an affidavit with a statement of the debtor's assets, creditors, debts and other liabilities.

Insolvency, Restructuring and Dissolution Act s 308

The court must not make a bankruptcy order on a debtor's own application unless it is satisfied that the debtor is unable to pay their debts.

Insolvency, Restructuring and Dissolution Act s 318(1)

If the debtor meets the qualifying criteria in the Act, such as total debts within the limit it sets and no bankruptcy in the previous 5 years, the court must instead adjourn the application for 6 months, or another period it directs, and refer the matter to the Official Assignee to decide whether the debtor is suitable for a debt repayment scheme.

Insolvency, Restructuring and Dissolution Act s 318(3)

A debt repayment scheme

After such a referral, the Official Assignee requires the debtor to submit a statement of affairs and a debt repayment plan with a repayment period of not more than 5 years.

Insolvency, Restructuring and Dissolution Act s 290(1)

While a debt repayment scheme applies, a creditor owed a debt provable under it has no remedy against the debtor or the debtor's property for that debt, and no action or proceedings may be started or continued against the debtor for it, except with the court's leave. This does not affect a secured creditor's right to deal with its security.

Insolvency, Restructuring and Dissolution Act s 293(1), (2)

Discharge from bankruptcy

Subject to section 396, where a bankruptcy is not a repeat bankruptcy, the Official Assignee must not issue a certificate of discharge unless the target contribution has been paid in full (or the Official Assignee is satisfied it cannot be, due to extenuating circumstances) and either 3 years have lapsed after the administration date with no objection from the relevant threshold of creditors, or 5 years have lapsed; or else 7 years have lapsed after the administration date. The section says how those periods are counted.

Insolvency, Restructuring and Dissolution Act s 395(2)

Discharge releases the bankrupt from all the debts provable in the bankruptcy, subject to the Act. It does not release debts due to the Government, debts incurred through fraud or fraudulent breach of trust, or liability for a fine imposed for an offence, among others.

Insolvency, Restructuring and Dissolution Act s 397

Even after discharge, a discharged bankrupt must give the Official Assignee the assistance it requires in realising and distributing property vested in it.

Insolvency, Restructuring and Dissolution Act s 398(1)