When individuals or businesses are unable to meet their financial obligations, bankruptcy for individuals and liquidation for companies can become a necessary legal remedy. In Australia, bankruptcy is governed by the Bankruptcy Act 1966 (Cth).
This legislation sets out the rules for declaring bankruptcy, the rights of judgment creditors, and the obligations of judgment debtors.
The matter of Pannu Lawyers v Arunkumar Shantilal Patel provides a practical example of how to successfully pursue a bankruptcy application when debts remain unpaid.
Step 1 – Establishing the Debt:
The initial step in bankruptcy proceedings is confirming that a debt exists. Under the bankruptcy Act, the debt must:
- be at least $10,000;
- be legally enforceable;
- be owed to the Creditor without dispute.
Arunkumar Shantilal Patel owed Pannu Lawyers a significant debt and despite demands failed to satisfy the debt.
Step 2 – Obtaining a Judgment Debt:
Before a Creditor can pursue bankruptcy, they must obtain a judgment debt through the courts. Once the court makes an order confirming the debt, the Creditor has legal standing to institute bankruptcy proceedings. In the matter of Pannu Lawyers v Arunkumar Shantilal Patel, a Judgment was awarded in favor of Pannu Lawyers for the outstanding debt.
Step 3 – Issuing a Bankruptcy Notice:
When a judgment debt is successfully secured, the creditor submits a request to the Australian Financial Security Authority often referred to as (AFSA) to issue a bankruptcy notice. This bankruptcy notice requires the debtor to either:
- pay the debt in full; or
- enter into debt agreements or personal insolvency agreements.
Debt agreements are identified as legally binding agreements between debtors with low levels of debt, asset and income.
Personal insolvency agreements on the other hand are legally binding agreements between a debtor and the creditor and can offer a flexible arrangements to settle debts without becoming bankrupt.
Failure to comply with the bankruptcy notice makes way for a formal bankruptcy application in Court.
Step 4 – Filing a Creditor’s Petition:
If the debtor does not satisfy the bankruptcy notice, the Creditor may file a Creditor’s petition in the Federal Circuit and Family Court of Australia. All new bankruptcy applications should be commenced using the bankruptcy forms approved under the Federal Circuit and Family Court of Australia and must state the relief sought together with the relevant section under which the proceedings are brought.
The Creditor’s petition must include:
- a copy of the Judgment Debt;
- evidence of non compliance with the bankruptcy notice;
- and confirmation that all statutory requirements have been complied with.
In the matter of Pannu Lawyers v Arunkumar Shantilal Patel , the petition against Arunkumar Shantilal Patel was pursued after his continuous non compliance.
Step 5 – The Court Hearing and Sequestration Order:
At the Creditor’s petition hearing, the Court considers whether the Debtor has committed an act of bankruptcy and whether all legal requirements are satisfied. If so, the Court issues a sequestration order, which declares the debtor bankrupt.
A sequestration order is a Court order which declares an individual bankrupt and appoints a trustee to manage their assets and financial affairs.
Once the sequestration order has been granted, a registered trustee is then appointed to take control of the debtor’s estate, investigate their finances, and distribute assets to creditors.
Step 6 – Administration of the Bankrupt Estate:
Once declared bankrupt, the Debtor must:
- disclose all assets and income to the appointed registered trustee;
- cooperate fully with investigations in identifying assets.
Bankruptcy usually lasts for 3 years and 1 day. After that time, you will have finished your bankruptcy and be discharged.
Alternatively, at any time during your bankruptcy, you can make an offer to your trustee to repay your debts for less than what you owe.
Bankruptcy is a technical process that requires experience, compliance and a clear strategy. Pannu Lawyers have a proven record of success in pursuing bankruptcy applications on behalf of creditors. From securing Judgment debts in Courts to navigating bankruptcy proceedings, each step is handled with accuracy, precision and professionalism.
By engaging Pannu Lawyers , creditors gain the confidence that their matter will be pursued efficiently and effectively, safeguarding their legal rights pursuant to the Bankruptcy Act. This article is intended for general information and shall not be taken equivalent to legal advice. For tailored advice, please consult Pannu lawyers.