What does it mean if I go into bankruptcy?
- You will have a trustee that will manage your bankruptcy
- Bankruptcy may affect your income, employment and business
- Bankruptcy does not release you from all debts
- It affects your ability to travel overseas
- Your name will permanently appear on the National Personal Insolvency Index (NPII)
- Bankruptcy can affect your ability to obtain future credit
- Your trustee may sell your assets
- You may lose the right to take or continue legal action
- Bankruptcy normally lasts for 3 years and 1 day from the day you file your Bankruptcy Form
When you declare bankruptcy, a Bankruptcy Estate is created automatically. Your debts are taken over by the Bankrupt Estate leaving you debt free.
Assets you will probably keep
Your essential assets (example; household furniture, car and tools of trade) are protected while non-essential assets (example; shares, boat and caravan) will be sold by the bankruptcy trustee.
Assets you will probably lose
- real estate including houses and land
- cars in which you have more than $7,700* equity
- personal effects such as antiques and luxury electronic items
- tools of trade over the value of $3,750*
- artworks of significant value and some jewellery
- any inheritance, tax refund or winnings
- money in bank accounts in excess of $1,000
The funds are paid by the bankruptcy trustee to those to whom you owe – in accordance with the legislation.
If there is no money because there are no assets or income from your wages, creditors just write off their debt. They can no longer ask you to pay the money you owe.
The Bankruptcy Act provides fairness between for you and the creditors. But remember there are penalties if you abuse the system.
During bankruptcy you cannot own things like boats, or shares in companies. You need written permission from the Trustee to:
- travel overseas
You cannot be
- a company director,
- manage a company or
- a trustee of a self-managed super fund for the duration of your bankruptcy.
When you become bankrupt, the credit rating agencies will place a mark against your name for five years. This makes it very difficult for you to get a loan during this time.
- Bankruptcy will cancel most of your debt, but not all
- Your creditors and their debt collectors will stop hassling you
- Saving is something you can start doing again
- You probably keep your car as long as you keep up the payments
- You may be able to keep living in your home
- Overseas travel is possible – there are some rules, but you can go
- You don’t have to go to court to go bankrupt
- It is completely private. No media and no police involved
- You will be you again, with peace of mind, improved health and able to sleep
- Offers a fresh positive start
Being in Bankruptcy does not stop you earning
It’s also important to note that for the purposes of your bankruptcy, a dependant is someone who lives with you and is wholly or partly reliant on you for economic support. Dependants are not just children. A husband, wife or partner who is wholly or partly reliant on you for economic support also fits the bill. A dependant can earn $3642 per year before they cease to be eligible as a dependant.
Allowable earnings….
No Dependents: you will be able to keep at least $1,112 week after tax
One dependant: your after tax income can be $1313 week take-home pay.
Two dependants: your after tax income can be $1413 per week.
Three dependants: your after tax income $1468 per week.
Four dependants: your after tax income can $1491 per week.
More dependants: your after tax income can be $1513 net per week.
