If You Have Unliquidated Debts Get Legal Advice Before Declaring Bankruptcy
Some debts are not included in bankruptcy until they have been liquidated liability admitted and the amount agreed upon .
The most common example is a debt arising from a motor vehicle accident such as damages to another persons vehicle.
If you are considering bankruptcy and some of your debts are from an accident, or otherwise dont arise from a contract , then you should get legal advice before going bankrupt.
What Is Personal Bankruptcy
Bankruptcy is a process that allows a person to manage their creditors. Before applying to the Court for a bankruptcy order you should engage with your creditors and ask for more time to pay, seek a flexible payment option or seek to enter into a debt agreement.
REMEMBER: Bankruptcy can have serious consequences on your ability to obtain future credit and deciding to declare bankruptcy should not be done lightly.
When Can Creditors Access Superannuation
As the funds in your superannuation fund are not considered divisible property, some Aussies may be tempted to contribute their divisible funds into their superannuation to protect it from creditors.
However, in such cases, the protection of your superannuation can be voided by your creditors, and they can access your super funds for recovery. Here are some situations under which creditors can access your superannuation:;
- A large contribution was made to your super before bankruptcy.
- The fund contributed to your super would have otherwise been a part of the bankrupt estate and would be available to creditors.
- The intent of the contribution was to make the property or fund unavailable to creditors or to delay the process of recovery.;
If youve accessed your superannuation funds before bankruptcy and the funds are still in your bank account at the time of bankruptcy, the funds will be considered divisible property and will be available to creditors. This includes any funds taken as a lump sum, and even as a pension.;
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What Happens To My Vehicle When I Become A Bankrupt
We assume that going bankrupt with no asset is not the case here. Owning a car when bankrupt comes with its strings attached. The main party you are dealing with is your Trustee and they will request for detailed information about your vehicle and this may include the value of the car and any outstanding payment on the car.
The following factors are considered by your Trustee to determine if they will need to take possession of your car or not.
;;; The value of the car must be below the amount to be paid
;;; Repayment on the vehicle in the case of it being under finance
;;; The vehicle is your main means of transport.
When your vehicle is claimed by your trustee, such a car is sold and the proceed is used as part of the payment of debt.
You can buy a car while bankrupt also but the value must be under the equity determined amount. If the value of the car exceeds this equity set amount, the trustee may deem it necessary to claim the car and sell. In case a car is received as a gift, trustee considers such a car as your own and the value of the car will determine if it will be claimed or not.
A car jointly owned must be purchased with your share of the equity under the set amount.
In What Circumstances Will The Home Be Sold
The home is not always sold. Whether or not the home is sold depends on your individual circumstances. The trustee will consider factors such as:
- if there is equity in the home
- whether there are any debts over the home for example, a mortgage
- whether the home has been purchased with protected money
- who owns the home
- who becomes bankrupt: the sole owner, one of the two co-owners or both co-owners .
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How To Go Bankrupt Without A Lawyer In Australia
This article is in no way discrediting the need for professional advice when filing for bankruptcy but aimed at giving detailed information on what to consider and steps to be taken when considering it. Bankruptcy is meant to be the last resort when it comes to inability to clear debts. It is recommended that you weigh your options before settling for bankruptcy as it is not really an easy way out but has its own consequences.
4 Steps to Go Bankrupt
1.Weighing all Available option
Like earlier stated, bankruptcy should not be considered as the easy way out of debt, and if you settle for this option, it is advisable not to take the process lightly. Others payment arrangement should be proposed to your creditors and explore all possible ways to resolve issues as regards debt owed. A Debt Agreement or Personal Insolvency Agreement can be explored first, but if these options do not work, you can now consider bankruptcy as a last option.
2.Eligibility Test
Some criteria qualify a person for bankruptcy. The first of such is that such an individual must be present in Australia and must be insolvent as at the time of filing for bankruptcy. The Authority body that determines if a person is genuinely insolvent is AFSA. AFSA takes a look at the ability of the applicant to pay back debts within a time range and also review the address. In a situation where the address given is not an Australian address, the applicant is asked to return to Australian before filing for Bankruptcy.
Types Of Debt Covered By Bankruptcy
When I filed for bankruptcy I wanted to know whether all of my debts would be gone to give me a clean slate, and if not, what debts would not be covered that I would have to pay. Once I understood what debts would be removed by my bankruptcy I was able to feel more comfortable with bankruptcy as a solution that would work for me.
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Understand Your Debt Situation
First, you must recognise that you are having financial problems, and you dont believe you can work them out on your own.
Every individual situation is different, but the following signs are typical of money problems that warn you to take action:
- You have failed to make one or more payments on a mortgage or loan.
- Your credit cards are constantly at their limit.
- You are paying bills by taking credit card cash advances.
- Your creditors have passed your account to collection agencies, who are now calling.
- You have received notice of legal action against you to collect money you owe.
- It will take you years just to get back to zero.
If you are feeling the pressure from debt, your first step is to make a commitment to explore your debt relief options.
What Happens After Bankruptcy
You are bankrupt for 3 years and 1 day. Your name continues to appear on the National Personal Insolvency Index , showing your bankruptcy has ended.
You should be aware, however that your credit report will continue to show your bankruptcy for either:
- 2 years from when your bankruptcy ends,
- or 5 years from the date you became bankrupt .
This means for most people after 3 years you can start going through the process of rebuilding your credit. Your consultant can help you here as well by providing effective strategies for getting your credit back on track and helping you manage your money.
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What Happens When You Are Declared Bankrupt
If you are declared bankrupt, your name will immediately and permanently be placed on the;National Personal Insolvency Index. Any one individual or organisation can conduct a search of the Index if they pay a fee of just $15.
If you are declared bankrupt, you must also provide details of all your debts, income, assets and any other information requested by a;registered bankruptcy trustee. If you dont appoint a bankruptcy trustee or your petitioning creditor does not nominate one, AFSA will become the trustee.
Your bankruptcy trustee may immediately take possession of certain assets to the end of selling those assets seized to raise money to repay creditors. It is the trustees job to try and achieve a fair outcome for all parties involved, including your creditors.
You must keep your trustee informed of any future changes to your situation while you are an undischarged bankrupt.
Can I Continue To Use My Credit Cards After Bankruptcy
It is a matter for the issuing bank or finance company as to whether they are prepared to continue to extend credit to you. All creditors at the date of bankruptcy should be listed on your Statement of Affairs and they will be notified of your bankruptcy. It is an offence for you to incur credit over a set limit without disclosing to the person you are dealing with that you are an undischarged bankrupt.
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Debts That Are Not Included
Not all debts are released by bankruptcy. You must still pay:
- Child support payments
- Court imposed penalties or fines
- Any student assistance or supplement loans
- Generally tax debts are released, but be aware that the ATO may deduct any money you owed pre-bankruptcy from your tax refund.
- Certain Centrelink debts, but only if the payments were obtained by fraud which needs to be proved
- Council and water rates
- Secured debts, such as your mortgage.
Contact A Bankruptcy Consultant Like Bankruptcy Bridge To Help You Understand Australias Debt Regulations
Your consultant will provide information about the process for filing bankruptcy, and about other debt relief options. Also, during the bankruptcy or proposal process your consultant will ensure your rights are respected and act with complete discretion.
When selecting your consultant, you should keep the following in mind:
- Your consultant should be personal and aware of your situation in DETAIL.
- You should feel comfortable with your consultant. Ask them questions about your situation and make sure you understand their answers.
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Claiming Bankruptcy Pros And Cons In Australia
Bankruptcy is a last resort option when it comes to clearing debts, and it is somewhat essential to have explored all other available option before settling for this arrangement. Bankruptcy is not the easy way out as it looks because attached to it are many conditions that will affect your life, and it is necessary to weigh your options. Let us consider the pros and cons of going bankrupt.
Pros
At the expiration of the bankruptcy, all debts are cleared
Freedom from creditors as it restrains them from debt collection or taking legal action against you
Bankruptcy prevents your goods to be seized as it protects essential household items such as appliances, clothes, and furniture
Your tools of trade whose value is below a certain determined threshold are protected too
Your personal injury compensation is protected same with superannuation
Your vehicle under finance if below the certain defined threshold is protected from being seized
Items of sentimental importance such as wedding rings, medals and trophies are spared
You have your income of certain threshold protected by bankruptcy
You are protected from your creditors in case they change their mind as regards debt repayment arrangement
You have the opportunity of operating a business as a sole trader.
Your record of bankruptcy is cleared from your credit history after 5 years or longer if you fail to fulfill your obligation.
Cons
National Personal Insolvency Index NPII will keep the record of bankruptcy permanently
What If I Have A Car
Once you become bankrupt, a vehicle which is used primarily as a means of transport , where your interest in the vehicle is less than a prescribed amount , is protected and can be retained by you. Where the interest in the vehicle is valued at more than the prescribed amount the trustee is required to sell, and give back to you the value of the prescribed amount and retain the balance for your creditors.
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Am I Eligible For Bankruptcy
Eligibility for bankruptcy in Australia is determined for an individual if these two conditions apply to such
;;; Having insolvent debts which are unpaid as at when due
;;; Such individual is present in Australia or has a business in Australia.
No minimum or maximum debt amount applies to make anyone eligible. Applying for bankruptcy is free as there is no fee to be paid but before applying, such person must first terminate debt agreement if such exist. Your administrator needs to be contacted to sort this out first before filing for bankruptcy.
Though bankruptcy is considered the last resort after all options of debt repayment are exhausted and no satisfactory arrangement could be agreed with creditors, it is advisable to be well informed about filing for bankruptcy and be sure there is no alternative. The consequence of bankruptcy can be costly.
So How Ds Bankruptcy Affect Your Taxes
You can become bankrupt voluntarily or you can be made bankrupt on the actions of a creditor. Once bankrupt, a trustee in bankruptcy will be appointed to manage your affairs and may dispose of your assets for the benefit of creditors. In addition, if you earn an income you are obliged to make regular payments or “contributions” to the trustee for the benefit of creditors out of your surplus income, which is broadly what the trustee assesses is an appropriate amount taking into account your income and the amount you need to maintain yourself and your dependents.
The normal period of bankruptcy is three years, plus one day.
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How Does Bankruptcy Affect My Employment
Your bankruptcy may prevent you from undertaking employment in certain occupations or holding various licences. We advise that you contact any professional bodies that you are registered with to ensure that there are no restrictions in continuing your employment in the event that you become bankrupt. Your employer is not normally notified of your bankruptcy unless you owe him/her money or unless you have failed to pay compulsory contributions. It is still your responsibility to lodge taxation returns.
Can I Earn An Income
Yes, you can earn an income during bankruptcy up to a certain amount. If you earn above the threshold you will be required to pay to your Trustee half of the amount you earn in excess of the threshold.
Your Trustee will assess your expenses, based upon your particular circumstances and taking into account the number of dependants you support, and issue you will an assessment for the amount you need to pay for the year.
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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.
Payment Of Debts After Bankruptcy Declaration
When you enter bankruptcy, your declaration may clear most unsecured debts, such as credit cards, personal loans, unpaid rent and overdrawn bank accounts. This means that you no longer have to repay them.
However, bankruptcy doesnt cover debts such as child support, HECS/HELP and toll fines. This means youre still liable for these debts. You should contact your creditors directly to discuss payment options.
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What Happens After An Annulment
The bankrupts name will appear on the public record forever, with the record showing that the bankruptcy was annulled. Credit reporting organisations also keep records of bankruptcies for seven years.
Other consequences of annulment include:
- Surplus assets following the deduction of the trustees remuneration and expenses will be returned to the bankrupt
- A bankrupt is still liable for the payment of debts that are not provable in bankruptcy. See;bankruptcy overview for more details
Need guidance with unmanageable debt?
Case Study: Back On Track After Bankruptcy
This is based on a true story.
She spent years juggling bills and loans and credit cards, as well as dealing with angry creditors and tense family relationships. With MyBudgets help, Maryanne looked at her situation from every possible angle, got expert advice on what is involved in declaring bankruptcy, and decided that bankruptcy was the right option for her.
MyBudget administered Maryannes bankruptcy petition and helped to put a budget in place that made sure Maryanne could live comfortably on her wage and pay her parents back over time. Maryanne said that it provided nearly instant relief having a caring support team to handle her creditors and pay her bills for her. By the time Maryannes bankruptcy was discharged, her debt to her parents was paid off, she had savings in the bank and was excited about her future.
If youve ever thought How does the bankruptcy process work? we hope this answered some of your questions
After reading all of this you might be wondering why youd declare bankruptcy at all? Now you know what is involved in declaring bankruptcy and the consequences of bankruptcy in Australia, you might be more keen to avoid ending up in a situation where you have no option but to declare bankruptcy. If youre concerned about your financial situation, or want to avoid bankruptcy, were happy to help.
Ready to find out more? Call 1300 300 922 to book your free budget consultation or enquire online.
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