FAQ bankruptcy

WHAT IS BANKRUPTCY?
Bankruptcy is a stage you arrive at when you cannot repay your debts and cannot reach an agreement with your creditors. Bankruptcy has serious consequences and you should seek professional bankruptcy advice.

There are two types of bankruptcy:

Voluntary Bankruptcy.
You can declare your own bankruptcy for any amount of debts that you are not able to repay to your creditors. Usually, no court hearing is required if your bankruptcy is performed voluntarily.

Forced Bankruptcy.
Your creditor can apply for you to be made bankrupt if you owe more than $2,000. The creditor must apply to the Federal Court or Federal Magistrates Court for a bankruptcy order, called a Sequestration Order.

WHAT IS A TRUSTEE?
A trustee is a person appointed to take control of your property and manage the process of your bankruptcy. When you become bankrupt, your property and any property acquired during your bankruptcy comes under a trustee's control. You must co-operate with your trustee, such as by giving your financial details when asked and notifying them of changes to your address and employment details.

ALTERNATIVES TO BANKRUPTCY ?

Financial Counseling
Contact a financial counselor to understand your options.

Informal Arrangements
An informal agreement can be proposed to your creditors. In this way you would pay only a part of your existing debt. Note that a creditor may or may not agree with your proposal.

Debt Agreements
If your debts, income and your assets are below certain limits you could put a formal proposal to your creditors through the Official Receiver.

Personal Insolvency Agreements (PIA)
If your debts, income or assets are above certain limits you can propose a PIA. If you have several creditors, a majority of creditors must accept the proposal to be binding on all creditors.

ADVANTAGES OF BANKRUPTCY?
- All of your debt will be cleared
- You can keep some of your assets.
- Debt collectors and creditors are not allowed to contact or harass you
- Most of your debts can be written off, allowing you to start afresh


WHAT ASSETS CAN I KEEP?
- All necessary personal things and household furniture
- Your car if it is worth less than $6,500 (Wholesale value)
- Tools of trade used to earn income, up to the value of $3,250
- A house bought with a Veteran’s Affairs loan
- Money or assets (including a house) obtained from personal injury or compensation damages.
- Superannuation (some exceptions apply)
- Some insurance policies


DISADVANTAGES OF BANKRUPTCY?
- Bankruptcy will be noted on your credit record for 7 years from the date it starts
- You cannot incur a debt of $4,370 or more without telling the creditor you are bankrupt.
- You may lose some of your valuable assets
- You cannot travel overseas without the written permission of your trustee
- You can not write a cheque for more than $4,370
- If you earn above set thresholds you will have to make a payment to your creditors
- You cannot be a director of a company without Court permission
- You will not be able to obtain some occupational licences
- You must advise your trustee of any changes in your financial circumstances or your address.
- Failure to disclose this information can result in the bankruptcy period being extended.

WHAT ASSETS WILL I LOSE?
- Any house or land that you own.
- Cars above the threshold
- Expensive jewellery
- Valuable furniture
- Stocks and shares
- Inheritances received under a will, gifts and any lottery winnings received while you are bankrupt


CAN I KEEP A BANK ACCOUNT?
Yes, an ordinary bank account, though it should not be with a creditor you currently owe money

ARE THERE ANY DEBTS THAT I STILL NEED TO PAY?
There are debts which cannot be removed by bankruptcy::
- Child Support payments
- Fines imposed by a court
- Unliquidated claims
- Debts incurred through fraud
- Tax debts .
- HECS/HELP debts which arise after 1st January 2005.

HOW LONG WILL I REMAIN IN BANKRUPTCY?
The normal period of bankruptcy is 3 years from when the Statement of Affairs is filed and there will be a notation on your credit history for 4 more years. Your bankruptcy will be annulled if you repay your debts in full, including the trustee’s fees, or if an offer put to your creditors through your trustee is accepted.

DOES IT COST MONEY TO GO BANKRUPT?
There are costs in bankruptcy, however there is no filing fee or application fee for a person who voluntarily goes bankrupt under a debtors petition. If a creditor applies to have you made bankrupt (forced bankruptcy) then they will have to pay the costs, however those costs may become another debt to be paid in priority to other debts. The Insolvency and Trustee Service Australia usually handles the bankruptcy for voluntary debtors. A fee is charged for administering your estate and this is based on the money received from the sale of your assets.
Registered trustees charge fees on an hourly rate. They can usually only recover their fees from assets in the bankrupt estate. However, they are entitled to ask for a minimum fee (currently $1,443), if there are no assets or funds in the estate.

HOW TO GO BANKRUPT
Just fill out the bankruptcy enquiry form on our web site and we will help you with the process.