What can I do if a creditor is bankrupting me? What is voluntary bankruptcy?
If a creditor is taking action to bankrupt you, the first thing to check is whether you owe money to the creditor. There have been instances in the past where a creditor has been paid but the bankruptcy action has continued due to the creditor not realising payment had been received.
How to handle a creditor, debt and bankruptcy
If you dispute the debt, contact the creditor, and commence a conversation.
For a creditor to bankrupt you, the creditor must first have a judgement debt and then apply to the Australian Financial Security Authority for a Bankruptcy Notice. This is then required to be served on you and you then have a 21 day moratorium (six months under temporary COVID-19 legislation, which expires on 28 December 2020) in which the creditor is not able to take further action against you. Once the 21 days has expired, the creditor can proceed to commence a Creditors Petition for the Court to consider making an Order – declaring you bankrupt.
By firstly lodging a bankruptcy form with the Australian Financial Security Authority and becoming bankrupt, you can circumvent the court process. Lodging this form yourself is sometimes referred to as voluntary bankruptcy.
We recommend that you take control and take action to do this yourself. By doing this your stress levels will be lower as you will be in control. It also stops people turning up at your house to serve documents on you and you not knowing what will happen next.
If you are faced with a creditor commencing action to make you bankrupt, we recommend you give us a call to discuss your circumstances and we will give you our thoughts and recommendations.
Further Reading: We recommend our article 'Bankruptcy Notice – What is it?' and Filing for Bankruptcy and 'How to file for bankruptcy yourself in Australia' and 'What is Bankruptcy? How Does it Work?'.