If you have become so financially stressed in your personal life and you are in a position where you are facing bankruptcy then you should make sure that you are aware of the ways in which you can enter into bankruptcy?

There are 2 different ways in which a person can enter into bankruptcy. A person can either voluntarily commit themselves into bankruptcy or they can be involuntarily put into bankruptcy by their creditors.

Voluntary Bankruptcy

When you feel as though you are so financially stressed due to mounting debts which you are unable to get on top of and feel as there is no way out of your financial situation then you can voluntarily put yourself into bankruptcy.

In order to do this you will need to complete a Debtors Petition and a Statement of Affairs which will involve disclosing a whole ranging financial information relating to your debts and assets. These documents will have to be provided to a trustee or to the Australian Government department called the Australia Financial Security Authority (AFSA).

The Statement of Affairs is designed to be a complete list of you who you owe money to and whether it is secured or unsecured.

You must be aware that it is a criminal offence if you provide misleading information in your Statement of Affairs and Debtors Petition. Offences from false or misleading information can be punishable by jail.

As a part of filing out these forms you will consent to the trustee in bankruptcy to take control and manage your financial affairs.

Involuntary Bankruptcy

When you are place into involuntarily bankruptcy this is where you have been issued with a Bankruptcy Notice which indicates that you have 21 days in which to pay the debt detailed in the Bankruptcy Notice.

If you are unable to either pay the debt detailed int the Bankruptcy Notice or alternatively come to an arrangement that is satisfactory with the creditor.

Alternatively, you may need to move quickly to commence proceedings in the Federal Circuit Court or Federal Court to set aside the Bankruptcy Notice due to it being defective or if you have valid claim against the creditor.

If however, you are unable to set aside the Bankruptcy Notice and it expires then you will no doubt be pursued into involuntary bankruptcy by your creditor.

How long does a person remain in bankruptcy for?

Your state of bankruptcy should last for a period of 3 years from the day that you lodge your Statement of Affairs. However, your trustee in bankruptcy can seek to extend your bankruptcy for anywhere between an additional 2 years to 5 years if they claim that you have not co-operated with the trustee or if you have not paid your income contributions to them.

So ultimately a disgruntled trustee in bankruptcy can extend your time as a bankrupt from the standard 3 year to 5 year to 8 years.

So it pays to keep your trustee in bankruptcy on side and often it can be better to enter into voluntary bankruptcy where you have the choice of picking your own trustee who you will have a better chance of having a good working relationship with.