Bankrupt, Declaring Bankruptcy, Bankruptcy
March 3, 20174

Bankruptcy – does it matter if it is voluntary?

Posted by:Charles Bosse onMarch 3, 2017

When it comes to Bankruptcy in Australia, usually people aren’t aware that there can be both voluntary, and involuntary bankruptcy – both have different approaches and rules.

Involuntary bankruptcy occurs when somebody you owe money to applies to the court to declare you bankrupt. Commonly when you get one of these notices, you have normally 21 days to pay all the debt. If you don’t, then the creditor goes back to the court and asks the court to provide a sequestration order that declares you bankrupt. A trustee is selected, and then you have 14 days to get the documentation in and afterwards you are bankrupt.

You can challenge a bankruptcy notice by going to court following the 21 days have expired and put your case forward, to stop it going to the next level. Apart from the way you became bankrupt there is in fact no distinction between Involuntary Bankruptcy and or Voluntary Bankruptcy – once you are declared bankrupt, they’re managed to in the exact same way.

However, when it comes to Bankruptcy for this, the stress and anxiety, torment and fear that accompanies this method is incredible. If you think you are more than likely to be made bankrupt by someone, get some help and act on that advice. Generally I’ve found it’s always more effective to know what you can and can’t do before you have a person bankrupt you. Once you are bankrupt, it’s usually far too late.

Voluntary Bankruptcy

Alternatively, when it comes to Bankruptcy, sometimes there are moments that it is the best option. So you may have to ask yourself, ‘when should I consider voluntary Bankruptcy?’.

This question is not the very same for each person of course, but basically I find that one way you could work it out is to figure out just how long it will take you to pay every one of your debts – if its longer than 3 years (the period you are declared bankrupt), then this may really help you make that decision, and help you to understand Bankruptcy.

Once, I had an 80 year old pensioner, who came to me once regarding * Bankrupcty tell me that her credit card statement calculated how long her debt would take to pay at the level she was paying her account, and it was 35 years! Imagine 35 years for one credit card bill.

Credit rating damage can really help you think this through. If you move house and overlook to pay your $30 phone bill for 6 months more, it’s very likely the phone service will default your credit file. That default will remain on your file for 5 years, so for $30 you can have your credit file very seriously damaged for that period of time– and all of this will impact how you have to approach Bankruptcy.

In many ways, the ease with which companies/credit providers can default your credit file is unjust. The punishment doesn’t seem to equate to the crime in my book. So if you actually have defaults on your credit report for 5 years, remember that bankruptcy is on your credit file for a total 7 years then its wiped off completely.

So if your credit rating is a big detail in trying to decide whether to take part in a Debt Agreement or Personal Insolvency Agreement or Bankruptcy remember they will all sit on your credit file for a total of 7 years. The biggest difference is that with a DA or PIA you pay back the money and still have it on your file for 7 years.


I have mentioned the word a few times now, but when it comes down to it, Bankruptcy is the biggest part, and the element most people are afraid of when they come to me to discuss their financial situation and Bankruptcy. The other side of crime and punishment equation is bankruptcy, and in this specific country the provisions are very generous: you can go bankrupt owing millions of dollars and after 3 years it’s all over with no strings attached. As compared to countries like the United States, our bankruptcy laws are extremely generous.

I don’t pretend to know why that is but a few hundred years ago debtors went to prison. These days I suppose the government finds that the sooner it can get you back on your feet working and paying tax, the better. It makes more sense than locking you up which in turn costs the taxpayer anyway.

Bankruptcy wipes all of your debts including ATO debts with the exception of a few things:

  •  Centrelink Debts, Court Fines like parking and speeding fines.
  •  HECS or Fee Help loans.
  •  Money to pay for a car accident if the car was not actually insured.

There is a lot more that can be said about doing this and Bankruptcy in general but the objective of this blog was to help you decide between a few possible options. When getting some advice, always remember that there are always possibilities when it comes to Bankruptcy in Australia, so do some investigation, and Good luck!

If you would like to learn more about just what to do, where to turn and what questions to ask about Bankruptcy, then don’t hesitate to speak to Fresh Start Solutions Australia on 1300 818 575, we have offices in, Brisbane, Canberra, Sunshine Coast, Sydney, Melbourne, Gold Coast, Adelaide, Perth, Darwin and Hobart. or visit our website:


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