If your business has a lot of debt, seek help straight away from a professional, such as an accountant. They will assess your situation and give you advice on how to manage the debt.
They may suggest asking your creditors (people or businesses you owe money to) to give you more time to pay your debt, or accept a smaller payment to settle the debt.
Your financial adviser may also talk to you about the four options for dealing with debt that are available under the Bankruptcy Act 1966
Debt agreements and personal insolvency agreements are 'acts of bankruptcy'. This means:
- if your creditors don't accept the agreement, they can choose to take you to court and make you bankrupt
- for personal insolvency agreements, your agreement proposal will be permanently listed on the National Personal Insolvency Index (NPII) - any member of the public can view the index
- for debt agreements, your agreement proposal will be listed on the NPII up to 5 years possibly more.
Read more about the four options below, and remember to discuss them with your financial adviser before making any decisions.
Declaration of intention
You can freeze most of your debts for 21 days by lodging a declaration of intention (DOI). This gives you some time to consider what you can do to manage your debt, to avoid 'acts of bankruptcy'.
To lodge a DOI, you must meet certain conditions. Read more about DOIs
on the Australian Financial Security Authority (AFSA) website.
In a debt agreement, you can offer to settle your debts by:
- paying a lump sum that may be less than the amount you owe
- repaying your debt in instalments
- freezing the debt for a certain time, so you won't need to start repaying it until you get back on your feet.
To make a debt agreement, the majority of your creditors will need to accept it. You must also meet certain conditions to be eligible, including having your income, assets and debt under a certain limit.
For more information on debt agreements
, visit the AFSA website.
Personal insolvency agreement
A personal insolvency agreement (PIA) lets you pay off your debt in a way that suits your financial situation. It's like a debt agreement, but your debt, income and assets don't have be under a certain limit.
There's a chance that you'll end up paying more by signing a PIA than by declaring bankruptcy, so make sure you understand the consequences of each before deciding.
Read more about PIAs
on the AFSA website.
The two ways to become bankrupt are:
- volunteering to become bankrupt
- that your debtors (people or businesses you owe money to) can apply for you to be made bankrupt.
Becoming bankrupt means a registered trustee will take control of most of your finances and try to pay off your debts. They may sell your assets (though you can keep some types of assets
, like personal belongings) and take any income you earn over a certain limit.
Your bankruptcy will be permanently recorded on the National Personal Insolvency Index
, and included in your credit report
for seven years.
Bankruptcy usually lasts for three years. During this time, you'll be restricted in what you can do. For example, you may be restricted from running a company, or working in certain trades and professions.
Find out more about bankruptcy
and what the restrictions are on the AFSA website.