Our Revive Financial Case Manager has recommended Bankruptcy as a positive solution to your debt problem. We believe this solution will best suit your situation and lifestyle for your current circumstances. While Bankruptcy is often the last resort, it can also help people such as yourself break the debt cycle and provide a sturdy base from which to rebuild your finances. Below is a detailed summary of what Bankruptcy involves so you can make an informed decision about how you would like to proceed.
Bankruptcy Process
Once the official Bankruptcy application form has been completed this is lodged with the governing body AFSA (Australian Financial Security Authority). AFSA will make the appropriate checks, contact you to verify any information where required, approve your application and notify your creditors. A Bankruptcy number will be issued and this will be advised to you – this number can be quoted to any creditors who continue to pursue you for payment. AFSA will distribute a copy of your Bankruptcy to each of the creditors listed on the schedule of secured and unsecured creditors.
Bankruptcy Overview
Bankruptcy comes hand in hand with a set of restrictions which can have an impact on your lifestyle. However, it also provides immense relief and sets a financial baseline which allows you to rebuild your finances and move forward. Below is an overview of some of the restrictions and obligations you must abide by once you become Bankrupt. Read this over view carefully and consider how this decision might impact on your life.
After You Become Bankrupt
- Bankruptcy generally lasts for a period of three years but can be extended in certain circumstances.
- A permanent record of your Bankruptcy appears on the National Personal Insolvency Index (NPII), and will also appear on your credit file for 7 years.
- Your creditors are notified of the Bankruptcy and unsecured creditors should stop pursuing your for payment of your debts.
- A trustee will be appointed, in order to pay your creditors the trustee will:-
- Sell your assets (some assets can be retained)
- Mandate contributions from your income over a certain amount
- Investigate your financial affairs and may recover property or money that you have transferred to other prior to your Bankruptcy
Obligations During Bankruptcy
- Notify the Trustee of all changes in name, address and contact details
- Apply to Trustee for written permission to use your passport
- Notify the Trustee of any change in income during the term of your Bankruptcy, especially if your new income is close to certain income threshold limits
- Notify the Trustee if you inherit any property, win money or receive any assets whilst you are Bankrupt
- Cooperate with your Trustee and provide all information as requested, failure to do so may extend the term of your Bankruptcy
Restrictions During Bankruptcy
- When borrowing money you must disclose you are an undischarged Bankrupt when seeking finance over a certain limit
- You cannot be a director of a company or be involved with its management without permission of the Court
- You may be able to continue to operate a business whilst Bankrupt, however if you trade under an assumed name (ie partnership or firm name) you must disclose that you are Bankrupt to everyone that you deal with
- You may not be able to remain employed in particular trade or professions
- You may be prevented from continuing any court action that you have started
Assets
Assets are anything of value you own when you become Bankrupt plus anything you buy or receive before the end of your Bankruptcy. There are penalties if you do not disclose assets on your Statement of Affairs or disclose to the trustee in writing within 14 days of acquisition. Assets you can keep include:
- Most ordinary household or personal items
- Tools used to earn an income up to a set limit, $3,650 (March ’15)
- Vehicles, cars motorbikes where total value minus sum owing under finance is less than set limit, $7,500 ( March ’15)
- Most funds held in registered superannuation fund
- Compensation for a personal injury
- Asset held by you in trust for another person (ie. Child’s bank account)
- Awards of a sporting, cultural, military or academic nature
Assets your Trustee may sell to benefit your creditors include:
- Houses, apartments, land, farm & business premises including leases
- Motor vehicle other than exempt ones (see above)
- Shares & other investments including shares held in your employers business
- Tax refunds for income earned before you became Bankrupt
- Proceeds of a deceased estate where person dies before or during your Bankruptcy
- Lottery winnings and competition prizes
Assets you own with another person can be sold by your Trustee. If the co-owner is not Bankrupt the Trustee may agree to sell your share to them at market value. Secured creditors cannot take back an asset just because you are Bankrupt, however if you fall behind in payments they can take and sell it whether you are Bankrupt or not.
Employment Restrictions
The Bankruptcy Act does not impose restrictions on employment, certain industry associations or licensing authorities may impose restrictions should a member or licensee become Bankrupt. You should check with your relevant licensing authority or professional organisation to determine any impact on your ability to continue in that trade or profession prior to applying for Bankruptcy.
Income
If your after tax income exceeds a certain amount, you will have to pay contributions from your income to your trustee. If you are a low-income earner you will not have to pay contributions, however you may make voluntary payments to your Trustee. At the start of your Bankruptcy your Trustee will calculate if you are required to pay any income contributions during the first year of bankruptcy, this process will be repeated at the start of each subsequent year.
For further information relating to income contributions visit www.afsa.gov.au
Debts & Creditors
Certain debts will still need to be paid during Bankruptcy, these include penalties fines imposed by a court, damages from accidents, HECS student loans, debts incurred by fraud, child support / maintenance and any new debts after your Bankruptcy commences. Your Bankruptcy will not affect a creditors right to pursue another person such as a person who is guarantor for your debts or if you have debts in joint names with another person (ie. your spouse / partner). The Australian Taxation Office (ATO) may keep your tax refund and offset it against any debt you owe the Commonwealth (ie. ATO or Child Support Agency).
Unsecured creditors generally lose the right to recover their debts. Any legal action taken against you by an unsecured creditor must stop. If creditors continue to demand that you pay their debt immediately inform your trustee. Secured creditors may contact you to find out what will happen to an asset. You may be able to make arrangements to keep a secured asset.
Cost of a Bankruptcy Application
Bankruptcy can be a stressful and daunting process. While it is possible for you to download and complete the official Bankruptcy forms yourself, Revive Financial offers a professional service to assist you. Just one small error on the documents could see the forms sent back and the entire process delayed.
We ensure the forms are completed correctly and are reviewed by our compliance manager before being submitted so your Bankruptcy is as stress free as possible. Revive Financial offers a professional service and charge fairly for this. Our fee for bankruptcy includes initial client engagement, preparation of documentation, explanation of documents, lodgement with AFSA and creditor liaison. Full disclosure of all fees is made to ensure client satisfaction throughout the application process.
Who is Eligible?
Anyone who is a resident of Australia and experiencing debt can declare Bankruptcy. However because the ramifications can have a large impact on one’s life, it is often viewed as a last resort. For more information on bankruptcy or to speak to someone about your situation call Revive Financial 1800 534 534.
For more information on Bankruptcy, check out our Bankruptcy page here.
