After carefully considering the advantages and disadvantages of bankruptcy and after taking the best available advice, it may be that, for some people, bankruptcy is the most desirable solution. Such people may include:
- pensioners or beneficiaries who do not own a home, whose household goods have been purchased using a credit card or unsecured loan (but not subject to a consumer mortgage), who are unlikely to be earning other substantial income in the near future and who are being harassed by creditors
- deserted spouses or widows who have debts of their own and who are otherwise in the same position as pensioners or beneficiaries. However, if the debts are the responsibility of the other spouse (whether living or dead), bankruptcy may not be necessary
- low wage earners, especially if they have a large family, pressing debt problems and heavy, additional expenses, such as a sick child or a child with a disability.
Where a debtor would not benefit from bankruptcy, it may be possible to come to an arrangement with the creditors to pay all, or part, of the debts by instalments over a particular period. However, unless a formal agreement is made a creditor could still bankrupt the debtor and, should the debtor subsequently become bankrupt, any money paid to a creditor may be recovered later by the trustee as a preferential payment, see alternatives to bankruptcy.
Because of the far reaching effects of bankruptcy, always get legal advice regarding your options. A financial counsellor can also help you negotiate with creditors, and suggest options for dealing with unmanageable debt.
The content of the Law Handbook is made available as a public service for information purposes only and should not be relied upon as a substitute for legal advice. See Disclaimer for details. For free and confidential legal advice in South Australia call 1300 366 424.