When Business Debt Becomes Personal
When a business fails, the personal consequences are often where the real pressure starts.
Company debts do not always stay inside the company, especially after liquidation. They can follow directors and business owners personally through personal guarantees, director loan accounts, ATO Director Penalty Notices and other claims by liquidators.
If those claims cannot be dealt with in a reasonable period of time, bankruptcy or other compromise options are worth understanding and considering.
Bankruptcy is a formal process where a trustee is appointed to administer an insolvent person’s affairs and deal with divisible assets for the benefit of creditors.
Once bankruptcy starts, control changes. Divisible property generally vests in the trustee. That may include property owned at the date of bankruptcy, certain rights and interests, recoveries from void transactions and after-acquired property.
Bankruptcy can provide the relief required, but it is not always the right option and should rarely be considered in isolation.
