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What you need to know when considering bankruptcy


In general, you are allowed to retain your personal belongings, such as clothing. Customary tools of your chosen trade are also exempt from seizure, as are life insurance policies, injury compensation payments, and superannuation funds. Cars, motorcycles, and other vehicles are exempt up to a set value.

Assets which may be sold or seized in order to pay your debts include real property, such as houses, land, or business property, motor vehicles over a set value, investment funds, tax refunds, lottery winnings, and even estate proceedings in some cases. Once you become bankrupt, you are required to remain so for at least three years. This will seriously impact your ability to obtain consumer credit.

Not all debts can be forgiven in bankruptcy. Court fines and penalties, outstanding damages from accidents, and certain government debts are not dischargeable in bankruptcy proceedings.

Despite the serious negative effects of bankruptcy, there are times when it makes financial sense. If your debts far outweigh your assets, and you see no means of paying them off, bankruptcy allows you to offset your debts against your assets. This will essentially erase the unpaid portion of the debt and give you a new start, although not a fresh one; you will deal with the direct results of becoming bankrupt for three years, and it will remain on your credit report for at least seven years and your public record forever.

Recently proposed by Attorney-General Robert McClelland, the Bankruptcy Legislation Amendment Bill 2009 would make bankruptcy a less ruinous option for most individual. The bill proposes to increase the amount at which creditors can force bankruptcy from $2000 to $10,000; to increase the time period from seven to twenty-eight days between notice of intention to file a debtor’s petition and the time when creditors can start action to collect on debts, and to increase the amount of income, assets, and debt thresholds to allow more people to achieve relief from their debts. If this bill is passed, it would be a boon to many struggling with consumer debt, allowing them alternatives to bankruptcy and providing assistance to those already in the bankruptcy process.

If you are considering becoming bankrupt, it is to your advantage to contact a legal expert with the experience to assess your situation and provide you with the best advice on your financial problems. Bankruptcy can be a solution, but enlisting the help of an expert in the field will ensure you make the right decision for your financial situation.



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