Provide section and sub-section of the law in Bankruptcy Act 1966.
Case 1:
Malachy visists your office and wishes to know if the company of which he is a director is insolvent. He tells you that when the company commenced trading last April it had an overdraft of $200,000. It increased this to $450,000 in August and by January this year it had increased it again to $1,000,000. During this time it drew cheques totalling $3,000,000 that were dishonoured on presentation. The company sold stock but at less than cost price and the company suffered a loss of $500,000. The company has no substantial capital assets and no working capital. It has a trading loss for the first 12 months of $1,600,000.
Malachy has signed personal guarantees for some of the company debts and if the company is found to be insolvent he will be held responsible. He does not own any real property, has few personal possessions, and credit cards that are at the maximum limit. He fears he is a 'bankrupt'
Advise Malachy
Case 2:
Dimitri runs a cafe. He was born in Greece and although he has lived in Australia for 10 years now, he retain strong ties with his family in Athens. He owns property in Athens, regularly returns to Greece and sends money to his aging mother (who lives in Athens) as often as he can.
Unfortunately the cafe business has been struggling. This took its toll on Dimitri's marriage and his wife left him 18 months ago. They have recently divorced.
Dimitri has no financial training and has not kept accurate financial records of the cafe business, but even without these he knows he has cash flow problems. He has been struggling to pay his creditors and some trade creditors have threatened to stop their supplies. He estimates his liabilities at approximately $1 million and his assets at $50,000
Dimitri's financial crisis deepened and on 1 April he was forced to consider bankruptcy. By this time his ex-wife had ontained a court order requiring him to pay maintenance to her. He has fallen behind in maintenance payments and currently owes her $2,000.
Ten years ago Dimitri entered into a debt agreement and was satisfied with this procedure.
Dimitri has come to you with the following questions:
a. Is there any reason why he can't use the debt agreement process again?
b. His ex-wife is bitter and will do all she can to prevent Dimitri avoiding bankruptcy. If a debt agreement is proposed, what rights, if any, does she have to prevent it being accepted, to have it terminated or otherwise brought to an end?
c. Are there any disadvantages to entering into a debt agreement compared with presenting a debtor's petition and so becoming bankrupt?
d. If Dimitri were to consider using a personal insolvency agreement instead of a debt agreement, what difference, if any, would this make to your advice given above?