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Voluntary bankruptcy involves the debtor lodging a Debtor's Petition and a Statement of Affairs.
The Debtor's Petition is an application to become bankrupt.
The Statement of Affairs provides details of the debtor's assets and liabilities and other details concerning income and transactions in the period prior to bankruptcy.
Upon the Official Receiver's acceptance of the Debtor's Petition and Statement of Affairs the debtor becomes bankrupt.
The period of bankruptcy is 3 years from the date of filing the statement of affairs unless extended to 5 or 8 years due to non-compliance with the law.
Bankruptcy may affect the debtor in a number of ways:
All property of the bankrupt vests in the trustee except household property, property used to earn personal exertion income (under a certain threshold), primary means of transportation (under a certain threshold), life insurance and superannuation polices.
You cannot be a director of a company.
If your income exceeds a certain threshold you may be required to make certain contributions
Creditors are restrained from further recovery action
PERSONAL INSOLVENCY AGREEMENT
A Personal Insolvency Agreement (PIA) or a Part X Agreement, is a formal agreement with creditors.
A PIA provides relief from creditors and the opportunity for a proposal concerning repayment of debts. These repayments may come from some or all personal assets and income or other sources.
A Controlling Trustee takes control of the individual's property and offers an opinion whether the acceptance of the PIA is in creditors best interests.
The PIA is considered at a meeting of creditors and acceptance of a PIA means:
Release from debts to the extent specified in the PIA;
All creditors are bound by the agreement; and
Creditors are unable to take further legal action.
Personal insolvency is the circumstance where the individual suffers personal financial hardship and is administered by the Bankruptcy Act 1966.
A debtor may become bankrupt voluntarily by filing a debtor's petition together with a Statement of Affairs or involuntarily upon Sequestration Order being made by the Court.
The effect on the bankrupt is the same irrespective of the manner in which the bankruptcy is initiated.