Declaring bankruptcy can be amongst the most difficult decisions you make in life. For most people the thought of bankruptcy is devastating and extremely stressful.
If you feel like your back is against the wall and the stress of all your debts are affecting you, your family, your friends and even your performance at work, let us help. The bottom line is there are ways to overcome your situation and bankruptcy may be your best option. Let the friendly compassionate staff at PDS discuss with you the pros and cons of bankruptcy and its alternatives.
If you are in a position where you feel you are unable to pay your debts and cannot come to a satisfactory arrangement with your creditors, bankruptcy could be your best option. You can voluntarily lodge a debtors petition to become bankrupt. If you just ignore your debts then a creditor may bankrupt you.
You do need to be fully informed about bankruptcy because some of the consequences may affect your assets. Once you have spoken with PDS, and after reviewing all of your options and bankruptcy is your best option, PDS will assist you through the process.
HOW LONG AM I BANKRUPT?
A bankruptcy will usually last for three years, unless the Trustee lodges an objection to you being discharged in which case it may be extended for a further five years (these are usually unique circumstances).
DOES BANKRUPTCY AFFECT MY CREDIT RATING?
When you become bankrupt your name will be entered on the public record (NPII) National Personal Insolvency Index forever. Your name will also appear on Commercial Credit Agencies Reports for five years from the commencement of your bankruptcy. This may limit your ability to obtain credit throughout that period.
WHAT WILL HAPPEN TO ME ONCE I HAVE BECOME BANKRUPT?
- Most legal action against you from unsecured creditors will stop.
- Any garnisheeing of your income or bank account will cease.
- Any recovery action by a sheriff or bailiff will stop.
- Once you have become bankrupt your unsecured creditors must cease to contact you, and they can no longer hassle you for money or threaten to take your assets.
- If an unsecured creditor continues to harass or contact you then you should report this to your trustee.
- You must disclose joint debts, secured debts, unsecured debts and debts you have taken out with family and friends
DO I HAVE TO PAY ANY DEBTS ONCE I AM BANKRUPT?
If you have a secured debt such as a mortgage or car loan and you wish to retain these assets you will be required to maintain the repayments on these loans. If you cannot afford to keep paying them you can hand these assets back to the creditor. The secured creditor will sell these assets and any shortfall will form part of your bankruptcy as an unsecured debt.
DO I LOSE ALL MY ASSETS WHEN I BECOME BANKRUPT?
No, when you become bankrupt some of your assets can be retained because they are protected property. Other assets may be recovered by the Trustee.
Assets you are generally allowed to keep when you become bankrupt include:
- Tools of trade used to earn an income up to a set limit
- Vehicles (cars and motorbikes) up to a set limit
- Most funds in your superannuation fund
- Life insurance policies
- Compensation for personal injury
- Most of your ordinary household or personal items
- Centrelink payments are also protected
It is recommended that before you file for bankruptcy you investigate what assets are protected and those that are not. If you are not sure call PDS to discuss this matter.
Examples of assets that your Trustee can recover are:
- Property – including houses, apartments and land
- Vehicles that exceed the threshold
- Tax refunds from income earned before you became bankrupt
- Proceeds from a deceased estate, where the person had died before or during your bankruptcy
- Lottery winnings
Your share of any assets that are jointly owned with another person may be sold by your Trustee. Call us at Professional Debt Solutions to discuss this.
WHO WILL OVERSEE MY BANKRUPTCY?
Your bankruptcy will be administered by a Registered Trustee or the government appointed trustee AFSA (Australian Financial Security Authority). PDS is affiliated with a Registered Trustee that may consent to act on your behalf.
WILL I LOSE MY CAR?
Once you have become bankrupt, you may keep vehicles (cars or motorbikes) used mainly for transport where your interest in the vehicle is less than the indexed amount set by ASFA.
If your interest in the vehicle is valued higher than the prescribed amount the Trustee is required to sell the vehicle, and give back to you the value of the prescribed amount and the balance will be retained for your creditors.
CAN MY CREDITORS STILL HARASS ME AND INSIST ON ME PAYING THEM ONCE I HAVE BECOME BANKRUPT?
No, once you have become bankrupt the Bankruptcy Act 1966 prevents creditors from recovering any money from you and must cease any recovery action. If creditors do attempt to recover money or harass you, you will need to advise them of your bankruptcy number. If they continue to do so after notifying them you should notify your Trustee.
WILL I LOSE MY JOB IF I GO BANKRUPT?
Generally NO. But your bankruptcy may prevent you from undertaking employment in certain occupations or from holding certain licences. If you are unsure contact us at PDS to discuss, alternatively contact any professional bodies you are currently registered with to ensure there are no restrictions in continuing your employment. Generally your employer is not normally notified of your bankruptcy.
DOES GOING BANKRUPT AFFECT MY INCOME?
If you earn less than the indexed amount you will not be required to make any contributions.
If your income is above the indexed statutory amount, you will be required to make “income contributions” to the Trustee for the benefit of your creditors. If you fail to make these payments the trustee can garnishee your income via notice to your employer.
CAN MY BANKRUPTCY BE CANCELLED OR ANNULLED?
If you are able to pay your creditors in full, or you make an offer and your creditors accept this as full and final payment, then your bankruptcy will be annulled.
Professional Debt Solutions can assist you with a bankruptcy application.