Declaring Bankruptcy – it is vital that you have the information. Before Declaring Bankruptcy and dealing with AFSA, you should know that:
- A trustee will be appointed to administer your bankrupt estate;
- It is not guaranteed that you will be free from all of your debts;
- You might struggle to secure credit in the future;
- Overseas travel will be difficult as there are restrictions;
- Your assets could be seized and sold to pay off your debt;
- You will be bankrupt for three (3) years (possibly 1 year if new rules allow); and
- All wages, and business income will be affected after sequestration order.
A Trustee will be Appointed when Declaring Bankruptcy
A bankruptcy trustee is an insolvency practitioner (accountant) who is appointed to realise your assets and liquidate them to satisfy creditors. These trustees are usually registered practitioners or the trustee the Australian Financial Services Authority (“AFSA”) as the Official Trustee.
Debtor’s Petition – If you are a debtor commencing bankruptcy proceedings then you will have the right to assign a bankruptcy trustee of your choice.
Creditor’s Petition – If a creditor has taken steps to commence bankruptcy proceedings against you, then the creditor has the choice to assign the trustee.
If you are declaring bankruptcy it is vital that you get the right legal advice
It is not Guaranteed that you will be Free from all of your Debts
When declaring bankruptcy, you will be released from most of your unsecured debts. These are personal debts that are not secured by property, such as a mortgage for example. These unsecured debts include:
- Credit Cards, Bank Cards, Store Credit, etc.
However, there are some kinds of unsecured debts that are not released in bankruptcy. These include:
- Child support payments, fines (speeding for example), and penalties;
- HECS debts;
- Any debt incurred that is a result of fraud
If you have a secured debt (mortgage or car loan for example) and you fail to make the repayments, the creditor will satisfy their debt by selling your security. However, if there is any shortfall in the value of the debt against the value of the security, the difference will be assessed and covered in the bankruptcy proceedings after declaring bankruptcy.
You Might Struggle to Secure Credit in the Future
If you declare bankruptcy, you will struggle to get finance or credit in the future. You will find it difficult to borrow money from the banks, or enter into finance agreements (for a vehicle for example).
It will also be difficult to obtain a rental property, get gas, electric or telephone connected if you become bankrupt. It may even be difficult to get a bank account or the bank may impose some restrictions on the operation or use of your bank account.
Overseas Travel will be Difficult as there are Restrictions
Unless you are given express permission from the trustee in your bankruptcy, if you declare bankruptcy you will not be able to travel overseas and you may even be asked to give your passport to them during bankruptcy.
Your Assets Could be Seized and Sold to pay off your Debt
Almost all of your assets can be seized and sold by the trustee in bankruptcy to satisfy your creditors. You will be able to keep the following:
- Household goods, clothes, computer, furniture etc. (up to a certain value);
- Tools needed for earn an income (up to a certain value); and
- Vehicles (up to a certain value)
It is a criminal offence to try to conceal any property, remove any property, or dispose of any property from the trustee in your bankruptcy proceedings.
If you are declaring bankruptcy it is vital that you get the right legal advice
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You will be Bankrupt for three (3) years (possibly 1 year if new rules apply)
The timeframe for bankruptcy starts at the date on which your statement of affairs is lodged and is accepted. If any objections are lodged by the bankruptcy trustee, the bankruptcy period could be extended for up to 8 years.
The Improving Bankruptcy and Insolvency Laws Proposals Paper was released on 29 April 2016 and intends to reduce the current default bankruptcy period from three (3) years to one (1) year in some situations. It is unknown at the time of writing if or when these reforms will come into effect.
All Wages, and Business Income will be Affected
If you earn over $52,543.40 after tax for a person with no dependants and $66,730.12 after tax for a person with dependants, then the balance of your wage or salary will be the subject of contributions to the bankruptcy trustee.
You are not able to be a director of a company, and will not be able to manage a company without leave of the Court. Also, some professional licensing bodies may restrict or in some cases prevent you from working in that field any further, and you may not be able to hold any public office.
It is also a criminal offence, if you are trading under a business name different to your own, if you do not tell everyone that you are a bankrupt.
AFSA Information HERE
If you are declaring bankruptcy it is vital that you get the right legal advice
DEDICATED TEAM – BANKRUPTCY FOCUSED – PROVEN RESULTS
