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.
The economic conditions of our time have led to an emphasis on entrepreneurship, which in turn has resulted in the formation of a higher number of new businesses and start-ups. However, not all new businesses are successful and failed businesses can have serious implications for their directors through personal guarantees or otherwise.
In 2017, the government even proposed a bill that would have reduced the term of bankruptcy from three years to one year—to remove the negative stigma associated with filing for bankruptcy and encourage entrepreneurship.
You may be able to continue earning an income during a bankruptcy filing. However, if your income exceeds a certain amount, the trustee may claim all or part of it to repay your creditors.
Even if owned property is subject to a mortgage that covers more than the property is worth, it may still be possible to keep the property (as long as you continue to meet your mortgage obligations with your bank).
If you live in a family home and own an amount of equity in it, you, your partner or another adult family member may be able to offer to buy that equity from the trustee—the person managing the sale of the home—and stay in it.
You can register motor vehicles with a total value not exceeding a certain limit.
Bankruptcy law allows debtors to keep household goods and most other items of reasonable value. However, some personal property, such as expensive jewelry, rare collectibles, and business equipment, may have to be turned over to the bankruptcy trustee for liquidation.
Declaring bankruptcy can affect your credit history for up to five years and you will be listed on the national personal insolvency index for life.
While you are no longer able to obtain credit, or act in your own name as a company director after being declared a bankrupt, provided you do business under another name and notify clients of your status as a bankrupt, or “bankruptcy trustee” who is only providing services under a power of attorney, you can continue to work for yourself.
The information on this page is general in nature and is not advice. Before acting on the information on this page, you should consider the appropriateness of the information having regard to your own personal circumstances. If you have any questions about how bankruptcy might affect you, please contact us for a free initial consultation with a licensed insolvency practitioner who can give you personalised advice about how bankruptcy might affect your specific financial situation.