Hi there. You raise several important legal questions. For a person to become bankrupt, they must voluntarily lodge a petition to become bankrupt (called a ‘debtor’s petition’) or a creditor may take action to have the person declared bankrupt by a court order (called a ‘sequestration order’). Once bankrupt, a trustee is appointed to administer the bankruptcy.

Any unsecured creditors (such as banks that have loaned money or credit card providers) are not allowed to continue to seek payment of a debt from the debtor after the debtor has entered bankruptcy. These unsecured creditors must lodge a claim for their debts with the trustee (called a ‘proof of debt’) if they want to recover their money. An unsecured creditor can sell the debt to a third party (e.g. a debt collection agency) before or during the bankruptcy. The third party must follow the same rules as the original unsecured creditor and lodge a proof of debt with the trustee.

You mentioned Part IX and Part X of the Bankruptcy Act 1966 (Cth). These refer to two different financial arrangements that may be used instead of entering bankruptcy. If a person is unable to pay their debts, they may enter a Part IX ‘debt agreement’, which is a formal legal arrangement negotiated with creditors and administered by an independent person. The agreement is less restrictive than bankruptcy and allows a debtor to extinguish their outstanding debts. These agreements are designed for small debts, such as personal loans and credit card debts.

Another option is a Part X ‘personal insolvency agreement’, which is designed for individuals who have larger assets and debts. This type of agreement allows a debtor to propose a solution to their insolvency to creditors, whilst avoiding the serious consequences of entering bankruptcy. Unsecured creditors must follow the terms of the personal insolvency agreement.

From the information you provided, it is not clear whether you are ‘bankrupt’ (as that term is defined under the relevant legislation) or whether you have entered a Part IX debt agreement or Part X personal insolvency agreement with your creditors. The rights of unsecured creditors (and third party debt collectors) in recovering their debt will differ depending on the type of situation you are in.

As a general rule, if you have a complaint against a financial service provider, such as a bank or credit card provider, you can contact the Financial Ombudsman Service for more information or to lodge a formal complaint. Visitwww.fos.org.aufor more information.

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