What is Insolvency?

Insolvency is when a debtor cannot repay his debts. The common types of corporate insolvency include voluntary administration, liquidation and receivership. If a person, not a company, is insolvent personal procedures that apply include bankruptcy and personal insolvency agreements.

InsolvencySigns that may indicate a company is in financial difficulty include:

  • ongoing losses;
  • poor cashflow;
  • unpaid creditors outside usual trading terms; and
  • problems obtaining finance.

If the above list sounds familiar, then you may want to seek legal advice which may assist with increasing the chances of the company surviving.

The company is insolvent

If your company is insolvent, do not allow it to incur any further debt. It is best to call upon a voluntary administrator or a liquidator to assess the situation.

Trading while insolvent

If you continue to trade while your company is insolvent there are a number of penalties that are associated such as civil penalties, compensation proceedings and criminal charges.

Assisting an external administrator

As the director of the company you must assist any external administrator whether it be a liquidator, receiver or administrator with any information they require relating to affairs, reports, information and other details.

This information is to be used as a guide only. If you require legal advice please contact our team today stolaw.com.au or 1300 STOLAW.

(Source: Australian Securities and Investments Commission, 2014, http://www.asic.gov.au/asic/asic.nsf/byheadline/Directors+and+insolvency?openDocument)

What is Debt?

Debt

Debt is when one person owes money to another person. You can fall into debt if you:

  • Borrow money to purchase goods or services
  • Purchase products or services on credit
  • Don’t pay your utility accounts in a timely manner
  • Have outstanding fees owed to doctors or medical services

Debt Disputes

Debt disputes arise when there are disagreements between parties regarding the fixed or agreed sum of money, the value can be up to and including $25,000. Some examples of debt disputes are as follows:

  • Money hasn’t been paid for the removal of overhanging branches
  • Outstanding accounts or invoices
  • Rental arrears
  • Cost of work or goods supplied already agreed upon
  • Borrow money and not repaying
  • Wages not being paid
  • IOUs
  • Dishonoured Cheques

Resolving the dispute

Sometimes you may find it hard to resolve the dispute on your own. However, do try contacting the other party whether it is face-to-face, via phone or write to them. If an agreement can be made make sure all parties sign the agreement and keep a copy for your records.

If you cannot come to an acceptable agreement then you can choose to do the following:

  • You may like to invite the other party to attend mediation whereby you can try and settle the dispute outside of court;
  • Apply to the Queensland Civil and Administrative Tribunal (QCAT), to resolve the dispute if mediation hasn’t been successful; or
  • Apply to the Magistrates court, however this may take time and can be costly

Sexually Transmitted Debt – don’t be caught out!

Leisa ToomeyAs a Family Lawyer two of the most common questions I am asked when a relationship breaks down, and there are assets and debts to be sorted, are “who is responsible for the debt?” and, “why should that responsibility be shared?”

Debts of a relationship can be packaged into many forms but the key principles are these:

  1. when the debt was incurred
  2. for what reason
  3. the debt that existed at separation and those incurred after separation.

WHEN THE DEBT WAS INCURRED

If your partner had debt before you met him/her and that debt carries on into the relationship and still exists at the time of separation it may be omitted from the pool of net assets.  However if you both take that debt, and add to it during the relationship, then both parties become responsible for it and it can be taken into account at the end of the relationship.

If debt is created during the relationship, regardless of what name it was created under, or for what reason, the court usually says it’s a debt of the relationship that both become responsible for.

FOR WHAT REASON

People usually incur debt in a relationship to buy a house or car or on credit cards.  However, if debt was incurred and only one party to the relationship benefited, the Court will treat is as a joint debt.

The purpose of the loan/debt is not relevant in most cases. The key is the timing of the debts and if they were incurred during the relationship, it is more than likely to be deemed a joint debt.

THE DEBT THAT EXISTED AT SEPARATION AND THOSE INCURRED AFTER SEPERATION

At separation debt on mortgages and credit cards have to become someone’s problem.  If you continue to use the credit card post separation, the debt you have incurred can become your sole responsibility. This is a very different principle to debts incurred in marriage.

When you start talking division of assets, the debts that exist at the time of separation are the relevant debts to be taken into account and it is important when establishing debt levels, post separation, that those loose ends are met with an agreement sooner rather than later.  Ideally, you should consult a lawyer as soon as practicable to understand the implications of debt and how it may affect you in the wash up of a property settlement.  Every case is different so it is vital you seek advice to help you understand what applies in your particular circumstances.