Types of Bankruptcies for Individuals

Australia has three types of Bankruptcy: voluntary Bankruptcy, debt agreements, and personal insolvency agreements. Every kind of Bankruptcy has its own set of rules and requirements. Understanding their differences is important to determine the best solution for your financial situation. The Bankruptcy Act of 1966 governs the bankruptcy process and is administered by the Australian Financial Security Authority (AFSA).

Voluntary Bankruptcy

This is the most common type of Bankruptcy in Australia and occurs when an individual voluntarily applies to be declared bankrupt. This type of Bankruptcy is generally recommended for individuals who cannot repay their debts and have no other means of resolving their financial difficulties.

Debt Agreement

A formal debt agreement with creditors, also known as a Part IX Debt Agreement, is a legally binding agreement between an individual and their creditors that allows the individual to repay their debts over time. This type of Bankruptcy is generally recommended for regular-income individuals who can repay their debts over time.

Personal Insolvency Agreement

A personal insolvency agreement, also known as a Part X Debt Agreement, is a legally binding agreement between an individual and their creditors that allows them to repay their debts over time, usually with reduced repayments. This type of Bankruptcy is generally recommended for individuals who have a regular income but cannot repay their debts in full.

Types of Bankruptcies

In conclusion, the three main types of Bankruptcy in Australia are voluntary, debt, and personal insolvency agreements. Every kind of Bankruptcy has its own set of rules and requirements. Understanding their differences is important to determine the best solution for your financial situation.

Need more Information About the Types of Bankruptcy?

“Bankruptcy is usually a last resort option for most individuals who cannot repay their debts. However, there are alternative options available that may provide a more favourable outcome. At the Bankruptcy Advisory Centre, we can advise you on how bankruptcies work, help you consider all the options available, help you make informed decisions, and help you plan your way to financial freedom.”