Going Bankrupt or in Liquidation: Tips for Choosing the Right Advisor
Going from bedrock to bankrupt can be a scary experience.
When asking creditors for more time to pay, negotiating flexible payment arrangements, or offering smaller payments to settle the debt do not work, bankruptcy is the final solution. Generally, it is advisable for individuals and businesses to voluntarily file for bankruptcy or liquidation instead of waiting for creditors to seek permission from the courts to order you bankrupt.
Having the right advisor to help you navigate through bankruptcy or liquidation is an important step in the process. Here are four options debtors can choose from.
1. Financial counsellors
Financial counsellors are recommended by the Australian Financial Security Authority (AFSA) as a resource for dealing with unmanageable debt. They offer confidential and free advice about options for sorting through mounting debt. Best of all, they are independent and will work toward achieving your best interests, not that of creditors. However, very few will actually walk you through to the whole process of Bankruptcy.
Solicitors are great with legal matters but may not be familiar with accounting and insolvency and helping with the ongoing information that may be required. Debtors who choose this option should locate a solicitor who specialises in bankruptcy and liquidation the difficulty being they also work for trustees and liquidators who provide the majority of their work. Also, they tend to refer you to the Trustees that they get work from, not necessarily the one that will do the best job for you.
Accountants can help determine if there are other financial options before claiming bankruptcy. Some accountants focus on liquidation and bankruptcy can lead you through the process if you decide to proceed. Many will further refer clients to a registered trustee that is in their discussion group. In Australia the average accountant has 3 clients per year facing insolvency normally they don’t have a lot of experience in dealing with the complexities of Insolvency.
4. Private trustees
Private trustees are the preferred option when claiming bankruptcy. Creditors can nominate trustees, but I recommend avoiding this at all costs. When creditors appoint, the trustee is there with the creditor’s interests in mind and may not be impartial. Creditor-appointed trustees can be very aggressive and may not offer the best solutions, so it is best to avoid going this route.
5. Insolvency Advisors
Good Advisors have a team of accountants and solicitors they can refer to they will also have a panel of trustees and liquidators. They can help choose one that fits your needs. My clients are provided with three to four independent trustees and liquidators to choose from. There is an emotional component to bankruptcy, and good trustees recognise and understand that aspect of the process.
Over the years, I have dealt with a large number of trustees. Whether you go with a private or government trustee, find one that you can talk to. I have found The Government Trustee AFSA quite good to deal with. The majority of my Bankruptcy clients would go to them. With Liquidations we need to use a Registered Liquidator
Keep in mind a trustee should be there for you as well, not just the creditors. They help draw a line in the sand and set you on the right course toward financial recovery. When a letter comes out requesting more information from the trustee, answering it quickly is always the best approach. Be certain to answer the inquiry completely and satisfactorily to reduce the likelihood of complicating the process. This is where someone with experience is important to guide you through the entire process.
Yes, I am an Advisor, I work for you through the whole process, I have been through it personally, I use my 30 years’ experience to protect your interests. I have an idea of the emotions you are facing. It doesn’t need to be the end. Using the experience to build the future is the most important thing.