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How Does Bankruptcy Effect My Life
It is a common misconception that bankruptcy means you have “failed financially”. Bankruptcy has a negative stigma about it – but that stigma is changing. We live in a time where entrepreneurship and “being your own boss” is idolised. Inevitably with the increase in new businesses and start-ups, not all will succeed and those failed businesses have personal ramifications for their directors (whether that be through personal guarantees or otherwise).
In 2017, the government even proposed a bill that would have reduced the term of bankruptcy from three years down to one year – to remove the negative stigma and promote entrepreneurship.
In reality, bankruptcy has little to no impact on the majority of individuals.
You are still able to earn an income (as much as you possibly can – but if that income exceeds a certain threshold, the only impact is that you will have to split the extra with the bankruptcy trustee 50/50).
If you own a home and it is subject to a mortgage which covers the majority of the property’s value, you may still be able to keep the home (provided you agree to continue to meet your mortgage obligations with your bank).If there is equity in the home, you, your partner or family member can make an offer to purchase this equity from the trustee for consideration and continue to live in the home.
You are still able to have motor vehicles (up to a certain value).
You are able to keep most household goods such as furniture, your television and all other items of a reasonable value to be able to live (only expensive, rare or collectible items may be subject to the bankruptcy trustee).
By declaring bankruptcy, your credit report will show that you are a bankrupt for a period of five years and you will be listed on the national personal insolvency index for life. However, you are still able to obtain lines of credit (up to a set amount) and continue to work for yourself – so long as you do business in your own name (I.e. John Smith ABN: XXX) so that your clients can easily determine your status as a bankrupt, or if trading under another name, as long as you notify your clients that you are a bankrupt before doing business with them.
The above is general information and does not constitute specific advice. Each person’s circumstance is different. Our team can give you personalised advice on how bankruptcy will affect you in a free initial consultation where you can ask questions and receive answers from experts quickly.