What Are The Alternatives To Bankruptcy
You may feel like bankruptcy is your only option, but thats rarely the case. The only way to really know is to explore your situation from a variety of angles and model different scenarios using a detailed, long-range budget plan. Budgeting gives you the power to look at alternatives and analyse how they affect your short and long-term outlook.
Concerned about the consequences of bankruptcy in Australia? Possible alternatives to bankruptcy include:
Informal debt agreement
Before going down the path of bankruptcy, first speak to your creditors about informal payment arrangements that you can afford. Most creditors want to help, especially if you demonstrate that youre earnest about meeting your obligations. You may be able to arrange a break from payments for a period of time, a payment plan or hardship arrangements.
Formal debt agreement
As well as bankruptcy, the Bankruptcy Act includes provision for formal debt agreements that allow you to propose a reduced settlement amount to your creditors that you can pay off over time .
While you explore your options, you have the option of lodging a Declaration of Intention to Present a Debtors Petition . A DOI wont stop creditors from repossessing goods for secured debts, but it will provide a 21-day protection period where creditors of unsecured debts cannot take further action against you.
Affordably pay your way out of debt
In most cases, MyBudget can help people avoid bankruptcy
What Debts Will Be Cleared From Declaring Bankruptcy
After declaring bankruptcy most of your debts will be cleared so you won’t have to pay them after your bankruptcy ends. Although there are a few debts that are not included in this. The tables below show what debts are included in your bankruptcy so you can make an informed choice about whether it’s right for you.
Unsecured loan debt
|Debts from a property you damaged as a tenant||–|
How Long Will Selling The Home Take
Trustees will typically sell the home in a timely fashion. Generally, an individual remains bankrupt for 3 years. Trustees are required by law to sell a home within 6 years after an individuals bankuptcy ends. This allows 9 years to arrange the sale. If the trustee does not sell the home within this period, ownership of the home could be returned to the individual.
The 6 year rule only applies if the trustee is aware the home exists. If a home is not disclosed in the bankruptcy documents, the trustee will have 20 years to take possession and sell the home.
What Happens When You Declare Bankruptcy
When you declare bankruptcy, you will be released from most of your debts and your creditors will no longer be knocking on your door.
You will still be required to make your repayments on your secured debts such as your car or home loan. If you cannot make these payments, your house or car will most likely be repossessed by the bank.
You will still have to pay your child support alimony payments, as your bankruptcy status will not affect these.
How Does Bankruptcy Work
There are several ways in which bankruptcy can be declared. You can enter into voluntary bankruptcy through a debtors petition, or your creditors may apply to bankrupt you through a court, which is called a creditors petition.
Once you have been declared bankrupt, you can nominate a trustee or the Australian Financial Security Authority will appoint one for you to manage your finances.
You will be classified as bankrupt for three years, and your bankruptcy will be publicly registered on the NPII, National Personal Insolvency List.
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Get Out Of Debt Today: An Alternative To Declaring Bankruptcy & Insolvency
Finding your way out of debt can often be an overwhelming task you are most likely stressed , scared, and probably out of your depth with the wealth of legal jargon.
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Consequences Of Bankruptcy In Australia
While bankruptcy offers relief to you when you are unable to pay your debts, it comes with severe consequences. Declaring bankruptcy in Australia can have an impact on your:
- Assets, most of them would be sold to repay your debts
- Ability to internationally travel
- Ability to get future credit
- Business, employment, and income
It might also result in restricting future ambitions as being bankrupt prevents you from
- Continuing or starting some professions or trades
- Holding some public positions
- Holding the directors position in a company
It is essential to understand these consequences before you declare bankruptcy to determine if it is the right decision for you.
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What Happens When Bankruptcy Ends
Once you are discharged from bankruptcy, you can take back control of your financial affairs. Even though you are a discharged bankrupt, the bankruptcy will be permanently recorded on a national record called the National Personal Insolvency Index. This record is publicly available.
You may have difficulty obtaining credit, such as a home loan, after your bankruptcy ends. Credit reporting agencies keep a record of your bankruptcy for five years from the date you became bankrupt or two years from when your bankruptcy ends, whichever is later.
You may not repay some debts during bankruptcy, and so may have to deal with these once the bankruptcy ends. These include:
- any penalties or fines
- any debts you incurred by fraud or
- debts under maintenance agreements, such as child support debts.
What If Bankruptcy Is The Right Option
After learning how does the bankruptcy process work, should you decide that bankruptcy is the right option, having a workable budget in place is more important than ever. You will no longer be able to use your credit card to make ends meet and, without savings in the bank, you will have to be careful that your income stretches from payday to payday. Budgeting is also the key to addressing and fixing the issues that got you into financial difficulty in the first place.
While we aim to do everything we can to help you avoid bankruptcy, if it works out to be the best option, MyBudget can explain what is involved in declaring bankruptcy and help administer your bankruptcy petition for you. Well handle all the paperwork, liaise with your creditors and AFSA, and make sure that you have a workable budget in place that gets you on the path to lifelong financial fitness.
To find out more about what is involved in declaring bankruptcy or bankruptcy administration, call us or enquire online today to organise a FREE, no-obligation consultation with a debt strategy specialist.
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Being Discharged From Bankruptcy
When a debtor receives a discharge order, they are no longer legally required to pay the debts specified in the order. What’s more, any creditor listed on the discharge order cannot legally undertake any type of collection activity against the debtor once the discharge order is in force.
However, not all debts qualify to be discharged. Some of these include tax claims, anything that was not listed by the debtor, child support or alimony payments, personal injury debts, and debts to the government. In addition, any secured creditor can still enforce a lien against property owned by the debtor, provided that the lien is still valid.
Debtors do not necessarily have the right to a discharge. When a petition for bankruptcy has been filed in court, creditors receive a notice and can object if they choose to do so. If they do, they will need to file a complaint in the court before the deadline. This leads to the filing of an adversary proceeding to recover money owed or enforce a lien.
The discharge from Chapter 7 is usually granted about four months after the debtor files to petition for bankruptcy. For any other type of bankruptcy, the discharge can occur when it becomes practical.
When Is Bankruptcy A Good Idea
Filing for bankruptcy should be your last resort. If you:
- can show you are unable to pay your debts when they are due
- have exhausted all other options for debt relief
- and are present in Australia or have a business or residential connection with Australia, then filing for bankruptcy is one possible solution.
How Bankruptcy Affects Your Partners Assets
Your partners assets may also be affected by your bankruptcy. The trustee may also be able to sell them to repay your debts in any of the following situations:
- If you and your partner jointly own assets, your bankruptcy trustee can claim your share and force a sale of the relevant asset.
- They own assets that you helped to pay for , even if these assets arent registered in your name if it is deemed that you contributed to their acquisition or maintenance eg you helped with mortgage payments. If you previously owned these assets and transferred them into your partners name, the trustee will be likely to investigate the circumstances of the transfer, including the date it happened and when your relationship started.
What Is The Procedure For Selling The Home
The process for selling the home will depend on whether your home is held in:
- sole ownership OR
Sole ownership means that only one person owns the home.
- If you are a sole owner who becomes bankrupt, the trustees name is placed on the Certificate of Title in place of your name. This is to enable the trustee to sell your home .
- The trustee will then determine if the home is to be sold. The home will likely be sold if:
- there is equity in the home and/or
- it was not purchased with protected money .
- Once the home has been sold, the proceeds from the sale will be used to repay your debts.
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What Is Bankruptcy And Why That Can Sometimes Be A Loaded Question
Theres a lot to understand if youre going to answer the question what is bankruptcy? adequately. But dont worry, thats where we come in.
Lets start with the basics. In Australia, we use the term insolvent to describe when an individual, like yourself, becomes personally unable to pay their debts as and when they fall due.
For insolvent people, bankruptcy may be an appropriate solution.
When you become bankrupt, your provable unsecured debt is no longer payable. Unsecured debt includes credit cards, personal loans, shortfalls and even tax debt. That means no more anonymous phone calls or threatening letters from creditors after you become bankrupt.
A Trustee in bankruptcy will be appointed to manage what will be known as your bankrupt estate. Bankruptcy generally lasts for 3 years and 1 day, and then youre automatically discharged.
Whether or not your creditors receive any money from your bankruptcy will depend on how much you earn. Itll also come down to the type of assets that you own.
Its important to understand that bankruptcy affects people on an individual level because everybodys situation is different. Knowing what is bankruptcy is to understand the process and how your individual circumstances might determine how bankruptcy will affect you.
Interpreters To Communicate With Registry
If you need an interpreter to communicate with Registry staff you can call 131 450 and speak to an interpreter. Ask them to set up a three-way conversation between you, an interpreter and your nearest Federal Court of Australia Registry. If you live in Western Australia, you may directly contact the Registry staff, who will arrange a telephone interpreter for you.
It is your responsibility to arrange and pay for the cost of a translator to translate documents sent to you by the Court or the respondent.
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How Bankruptcy Can Affect Your Tax Situation
After you become bankrupt, you still have to file a tax return if you earn taxable income. You must keep your trustee informed of any notices of assessment that you receive from the ATO . As part of their arrangements with your creditor/s, they may claim some or all of any refund that you may receive.
The ATO may also keep any refund that you may be due in order to repay any outstanding tax or HECS debts that you may have.
What Are The Consequences Of Filing For Bankruptcy
Many people who are in debt believe that filing for Bankruptcy is the only viable solution to their inability to repay their debts however, this is not the case. Bankruptcy should be considered as a last resort.
Debt Negotiators will actively work with you to thoroughly investigate all other avenues to financial freedom before considering filing for bankruptcy.
Filing for bankruptcy may:
- lead to the sale of your assets such as your jewellery, house, car or furniture as you may be forced into the sale of assets to help cover outstanding debts
- lead to a requirement to make contributions, depending upon the level of your income
- have a potential impact on your current or future employment
- affect your ability to obtain future finance and credit as it may be listed with Credit Reporting Agencies
- lead to restricted permission to travel overseas for three years.
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How Does The Bankruptcy Process Work
When a bankruptcy petition is accepted, a trustee is appointed by the Australian Financial Services Authority to oversee the process. AFSA is the government agency that regulates and administers bankruptcy in Australia. While you are in bankruptcy, the trustee will manage your financial affairs.
This may include:
- Investigating your financial situation and trying to recover assets that you may have sold or transferred prior to bankruptcy
- Selling your assets, such as property or vehicles you own
- Communicating with your creditors and assessing their claims
- Claiming part of your income to repay your creditors
The duration of bankruptcy is usually three years and one day, however the consequences of bankruptcy in Australia last longer. When you are discharged from bankruptcy, you are released from your debts.
Bankruptcy will appear on your credit file for up to five years or longer and is permanently recorded on the National Personal Insolvency Index, a public record of people who have been bankrupt or entered into a formal debt agreement.
Australia To Overhaul Bankruptcy Laws To Help Firms Over Covid
2 Min Read
SYDNEY – Australia on Thursday unveiled its biggest shakeup in bankruptcy laws in nearly three decades, allowing businesses to trade while insolvent and take more control over debt restructuring, in a bid to help firms through the coronavirus crisis.
Under the proposed rule changes, businesses with liabilities of less than A$1 million will be able to keep operating while they come up with a debt restructuring plan, rather than be placed in the hands of administrators.
The changes aim to move the system from a rigid, one-size-fits-all creditor in possession model to a more flexible debtor in possession model, Federal Treasurer Josh Frydenberg said in a statement.
These are the most significant reforms to Australias insolvency framework in almost 30 years, and will help to keep more businesses in business and Australians in jobs.
Frydenberg said the government would adopt some rules from the U.S.-style Chapter 11 bankruptcy process, allowing eligible small businesses to restructure their existing debts while remaining in control of their business.
The Chapter 11 bankruptcy code in the United gives struggling companies a window to restructure debt while being protected from the threat of legal action by creditors.
The new rules, which will become effective from Jan. 1, 2021, follows the governments decision earlier this month to extend its temporary insolvency and bankruptcy protection rules until the end of this year.
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Is Bankruptcy The Right Solution For Me
Whether declaring bankruptcy is right for you is entirely dependent on your circumstances. Bankruptcy should only ever be your last option once all other debt relief solutions have been explored.
Get in touch with us today for a free debt assessment to review your options and identify the best debt relief solution for you.
Is Filing For Bankruptcy Right For You
Bankruptcy is a legal process that can be declared when youre insolvent, meaning you can no longer pay your debts when theyre due.
Once youve filed for Bankruptcy, you give up control of your finances and assets for a period of time.
In exchange, you receive protection from legal action from your creditors and a new arrangement to affordably pay off your debts.
Applying for Bankruptcy may seem like an easy and attractive option to quickly deal with your creditors, however, you should be aware of the disadvantages as well as the benefits of filing for Bankruptcy.
As we mentioned above, there are other options including Informal Arrangements and Formal Debt Agreements we can help you explore before you decide to file for Bankruptcy.
Benefits of filing for Bankruptcy include:
Disadvantages of filing for Bankruptcy include:
Eligibility Requirements of Filing for Bankruptcy
To be eligible to file for Bankruptcy, you must have a relevant Australian connection, for example:
- You are personally present or ordinarily live in Australia.
- You have a home or place of business in Australia.
- You or your firm/partnership is conducting business in Australia.
Additionally, your application may be rejected if:
For more information about benefits, disadvantages, and eligibility requirements, visit the official filing for Bankruptcyon the Australian Financial Security Authority website.
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