What are the Alternatives to Bankruptcy?

If you are experiencing extreme financial hardship, there is no doubt you will be considering bankruptcy.


Firstly, it should be said that bankruptcy is about allowing a person in overwhelming debt to relieve themselves of the debt burden and to allow themselves a fresh start.

If you are experiencing overwhelming debt, or a level of debt you will never be able to recover from, then bankruptcy may be the most appropriate course for you.

Informal Alternatives to Bankruptcy

To relieve yourself of the debt burden, you have choices. You may consider formal options that include bankruptcy or informal options for dealing with your debt.

Your informal alternatives to bankruptcy may include;

Avoiding Creditors

This option does nothing to deal with the debts you have as they will not legally disappear just through avoiding your creditors.

By making a choice to avoid your creditors, you are simply hoping that they will not take legal recovery actions that may include legally enforceable judgments, garnishees, writs of execution or even bankruptcy.

Just saying this, while avoiding creditors is not the most comfortable or effective way of dealing with debt, it is a valid strategy and it will work in many cases.

Private Arrangements or Settlements with Creditors

As a debtor you have the right to reach a private arrangement with individual creditors or the group of creditors.

A private arrangement may involve an agreement to pay a debt by installments or by a once only agreed lump sum that is accepted in full and final satisfaction of a debt.

Whatever the arrangement, the settlement should be evidenced by a Deed of Release for your protection.

Issues with Informal Alternatives to Bankruptcy

While you may avoid some creditors, make installment agreements or settlements with other creditors, there will always be one or two creditors that do not accept your proposal.

And because you have chosen to deal with creditors informally, it means those more stubborn creditors are not bound to your proposals and therefore, they are still able to pursue their chosen legal recovery option.

If this occurs, you will need to find a way or satisfying the stubborn creditor or you may find yourself bankrupt. This may involve paying a stubborn creditor a higher return than you paid to others. It may also involve you making a formal application to have a court imposed installment agreement in response to any judgment obtained.

What are the formal alternatives to bankruptcy?

Formal alternatives to bankruptcy exist under the Bankruptcy Act and if the appropriate majority of creditors vote in favour of these arrangements, all creditors are bound to accept the proposal.

The formal alternatives a debtor may enter into under the Bankruptcy Act includes:

If you want to discuss what are the alternatives to bankruptcy for you

Call The Insolvency Experts on 1300 767 525


Can a director be liable for company tax debts?

In a word, Yes. A director can be held personally liable for company tax debts – specifically:

  • unpaid PAYG withholding
  • unpaid superannuation guarantee payments

How can a director be liable for company tax debts?

If the ATO wishes to hold a director liable for a company tax debt, it must issue a Director Penalty Notice strattera medication.

A Director Penalty Notice may be issued to the home address of the director as it appears on the ASIC register or to the company’s tax agent address.

It is the director’s responsibility to maintain these addresses and if the notice is not received and not complied with because of the directors failure, the penalty will stand and they will not be able to avoid personal liability for a company tax debt.

The Director penalty is equal to the amount of the outstanding debt owed by the company for unpaid PAYG and unpaid super.

[youtube]If a person received a director penalty notice, they may comply with it so long as they achieved one of the options allowed within 21 days of the date on the notice:

  • pay the debt in full
  • appoint a voluntary administrator
  • appoint a liquidator

If compliance is not achieved within 21 days, the director becomes personally liable for the tax debt of the company.

A Director Penalty Notice works in 2 ways

First, if all BAS & Super returns are up to date, all having been lodged within 3 months of the due date, even though there may be a debt for PAYG and superannuation, a director will be allowed 21 days grace in which to comply with the Director Penalty notice.

If compliance is achieved within 21 days, the director will avoid personal liability for the stated company tax debts.

Second, If all or some BAS & Super returns have been lodged more than 3 months after the due date for lodgement, a director will be automatically and immediately personally liable for the company tax debts.

In these circumstances, there is no avoidance of personal liability for the company tax debt.

The ATO will pursue the director for the unpaid PAYG and super debt of the company.

If a director has not lodged a return or indeed any returns, the ATO can issue an estimate of what it believes the debt is and then issue a Director Penalty Notice based on those estimates.

In short, if you are more than 3 months late in lodging your returns, you are personally liable for the amounts shown in a Director Penalty notice.