Declaring Bankruptcy Australia

Before declaring bankruptcy Australia, one must as the question, What is Bankruptcy? Bankruptcy is a legal process where a person or an entity is declared unable to repay their debts to their creditors.  Bankruptcy is often viewed in a negative light; however, it can release you from most debts, provide relief and allow you to have a fresh start.

A person can be made bankrupt:

• by a creditor who obtains an order from the Court for the person to be sequestrated (bankrupted); or
• by voluntarily declaring themselves bankrupt through a debtor’s petition.

Bankruptcy typically lasts for a period of 3 years and 1 day.

Once declared bankrupt a trustee is appointed to their bankrupt estate.  The trustee, either an Official Trustee (government body) or a registered trustee (private firm), manages the bankruptcy.

THINGS YOU SHOULD KNOW BEFORE DECLARING BANKRUPTCY

Before declaring bankruptcy, it is important that you seek advice from your accountant, financial planner, lawyer or an insolvency professional.  Safeguard Insolvency can provide you with the advice you need and present the best option for you to deal with any unmanageable debts.

Some things you should know before declaring bankruptcy include:

• Often bankruptcy can be avoided.  Bankruptcy is just one means of dealing with your debts.  Other formal options include negotiated arrangements and debt agreements.
• Bankruptcy can impact your ability to obtain credit, travel overseas or hold certain types of employment.
• Bankruptcy does not release you from all debts.  While Bankruptcy does release you from liability for most unsecured debts, there are exceptions.
• Your name will permanently appear on the National Personal Insolvency Index (NPII).
• Bankruptcy can affect your ability to obtain credit.  If you apply for credit over a set amount, you must disclose your bankruptcy.
• Credit reporting agencies keep a record of your bankruptcy for (1) 5 years from the date of bankruptcy; or (2) 2 years from when the bankruptcy ends, whichever is later.

Obtaining advice from qualified professionals before declaring bankruptcy is advised.

FREQUENTLY ASKED QUESTIONS ABOUT BANKRUPTCY

What Happens to My Assets If I Go Bankrupt?

The most common question we are asked is – what happens to my assets if I go bankrupt? During bankruptcy, the trustee may be able to claim and sell some of your possessions (assets) and use those proceeds to repay money to your creditors.

When you declare bankruptcy, you must list all of your assets.  Assets may include, but are not limited to, property, vehicles, bank accounts, tools, interests in wills and even lottery winnings.

Can I Keep My Home If I Go Bankrupt?

If you are bankrupt and own a property, the trustee can claim the property as an asset of the bankrupt estate.  However, it might not be commercial for them to do so and there may be ways you can keep your home.

If you own any property and contemplating bankruptcy, contact us today.

Can I Keep My Car If I Go Bankrupt?

You are able to keep a vehicle as long as it does not exceed a prescribed value.

If it exceeds that prescribed value, the trustee may claim the vehicle.

Can I Keep My Household Items If I Go Bankrupt?

You are able to keep most normal, ordinary, household items as long as they are of a reasonable value.  Anything which might be expensive such as art or jewellery may be claimed by the trustee.

If you own any substantial household items of value, contact us today.

Can I Keep My Tools If I Go Bankrupt?

Tools you use to earn an income can be kept as long as they do not exceed the prescribed value.  To determine the value of the tools, you need to consider their current market value (the amount you would get if you sold them today), not the price you purchased them for.

If it exceeds that prescribed value, the trustee may claim the tools.

What Happens to My Partners Assets If I Go Bankrupt?

Your bankruptcy can also affect your partner and their assets if:

• They are jointly owned
• They are also entering into bankruptcy
• They are in possession of an asset which you own
• They own assets which you helped purchase

If any of the above apply to you, contact us today.

How Much Can I Earn If I Am Bankrupt?

Another common question we are asked is – how much can I earn if I am bankrupt? The answer, quite simply, is as much as you like.

There is no limit to the amount of income you can earn while bankrupt. There is also no limit to the amount you can save while bankrupt. Only impact bankruptcy has on your income is that, if your after-tax income exceeds the prescribed amount, you will have to make compulsory payments to the trustee.  These are known as income contributions.

The trustee uses these contributions to help repay your creditors.  If you earn over the prescribed amount, your trustee will notify you how and when you must make the payments.

In short, income contributions are:

• 50% of the amount you earn above the prescribed amount;
• Calculated yearly, by your trustee; and
• Paid to the trustee, usually used to help repay your creditors.

If you want to know what sort of income contribution you might have to pay, contact us today.

Can I be a Director of a Company If I Am Bankrupt?

You cannot be a director of a company while you are a bankrupt. You also are unable to manage a company unless you have the permission of the Court.

If you are a director of a company considering bankruptcy, contact us today.

Can I Run My Own Business If I Am Bankrupt?

You can run your own business while bankrupt – with certain restrictions.  If you are a sole trader for example your business name should contain your full name.  If it does not, then you must tell everyone you do business with that you are a bankrupt.

If you are a sole trader considering bankruptcy, contact us today.