Bankruptcy Help

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The Bankruptcy Option

Bankruptcy is basically saying to all of your creditors that you just can’t pay them what you owe and probably never will. Most people want to pay their debts but sometimes the means to do this has been taken away as a result of unemployment, sickness or injury, marriage break up, downturn in business turnover etc.

If you have a large amount of unmanageable debt which you have little or no chance of ever re-paying then filing for Bankruptcy may be a course of action you could consider. Bankruptcy does however have serious and long lasting consequences and this step should therefore not be taken lightly or without full knowledge of the terms and conditions involved.  There are other options to deal with unmanageable debts so before you make any decision or take any steps please give us a call.

In some cases Bankruptcy can be the best option to deal with your large debts. Whilst it has serious consequences these may be outweighed by the release of the stress to you and your family which happens as a result of constantly being harassed by creditors for payment or working long hours or second jobs just to keep your head above water. Sometimes it is best to just draw a line in the sand and start again.

Sometime Bankruptcy seems a good option and you may be advised to go down this path however it may not necessarily be the best thing to do given the other options that are available.

To become Bankrupt you can voluntarily lodge a Debtor’s Petition and complete a Statement of Affairs with the relevant Government Department (AFSA – Australian Financial Security Authority). You can also appoint your own Trustee to handle your case – more on this below.

A creditor may also bankrupt you by lodging a Creditors Petition. Once you have spoken to us and, after reviewing your options, you have decided that voluntary bankruptcy is your best option, we can assist you in taking the necessary steps to become bankrupt. You do need to be fully informed because the consequences of bankruptcy are serious.

There is no minimum amount required to be able to go Bankrupt however if the amount is small you should definitely consider other options. No creditor can make you bankrupt if your debt with them is less than $5000.

When you become Bankrupt you will not owe the debts anymore so your creditors should cease to contact you. Sometimes in the time surrounding you going bankrupt a creditor may sell a debt to a debt buyer and they won’t necessarily be advised of your bankruptcy. They may still attempt recovery however you only need to advise them of your bankruptcy number and this action will cease.

If your bank accounts or wages are being garnisheed or a sheriff or bailiff has recovery action in process then it all must stop. Also legal action which a creditor has taken against you must stop.
If any of your unsecured creditors continue to contact you then you should notify your trustee. They will contact the creditor.

There are some debts which you must continue to pay during bankruptcy and these include:

  • Unliquidated damages from accidents e.g. car accidents may be an exemption
  • Penalties and fines imposed by the court
  • Student assistance/supplement loans and HELP debts
  • Child Support Arrears

If you have any assets when you become bankrupt they will be sold by your trustee unless they are protected property under the Bankruptcy Act.

An asset is anything of value you own or have ownership in when you become a bankrupt and anything you buy or receive before the end of your bankruptcy. Make sure you thoroughly investigate exactly what assets are protected and those which are not before you file for bankruptcy.

When you become a bankrupt what you may keep includes:

  • Vehicles (e.g. cars or motorbikes) up to a set limit  (Roughly $7600)
  • Most of your ordinary household or personal items (Does not include valuable jewellery or works of art etc)
  • Most of the funds in a complying superannuation fund
  • Tools of trade used to earn an income up to a set limit
  • Life insurance policies
  • Centrelink payments are also protected
  • Compensation for a personal injury

Some assets are protected under bankruptcy (as above) and some are not.

Examples of assets that may need to be sold or otherwise form part of your repayment to creditors include:

  • Houses; units; land; businesses or any other property
  • Motor vehicles where the equity is over $7600
  • Tools of Trade worth more than $3700
  • Any tax refund for income earned before you became a bankrupt
  • Shares and other investments
  • Money gifted to you or lottery winnings
  • Deceased estate proceeds where the person died before or during your bankruptcy

Any asset you own with another person may also be sold by your trustee (eg. a house you jointly own with a spouse).

If you have equity in a property a trustee must deal with that equity for the benefit of all of your creditors. If the property is jointly owned, the trustee may consider selling his interest in your property to a non-bankrupt joint owner. Alternatively the joint owner, may make an offer to purchase the trustees interest in the property, provided they are not bankrupt. Whatever happens your interest in that property must be sold and the equity realised.

If you have a car and its net value is less than $7600 you will be allowed to retain the car for your personal use. Where the vehicle’s net value is more than the prescribed amount then the trustee is required to sell the vehicle and give back to you the value of the prescribed amount and retain the balance for your creditors.

Where debts are incurred in joint names then both parties are jointly & severally liable. So if you don’t have to pay because you are Bankrupt the creditor will chase the other borrower for the full amount.

A creditor is entitled to recover payment from a guarantor as Bankruptcy does not affect the rights of a creditor to claim under a guarantee. Most times a guarantor will be allowed by the creditor to meet the repayment terms of the contract however they can enforce full payment. If the guarantor pays out the contract the guarantor will have a claim against your estate under the bankruptcy.

If you cannot pay your existing debts as and when they are due you are said to be insolvent. Incurring further debt if you are already insolvent may constute an offence under the Bankruptcy Act, and you may be prosecuted.

You should contact your trustee as soon as possible if you remember about a debt at a later time after you have been made bankrupt. This debt would then be added to your list of creditors and they would be advised of your Bankruptcy status. Failure to disclose debts could extend the length of time of you bankruptcy.

If you become bankrupt you will be responsible for any debts you incur after you have been made bankrupt.

All unsecured debts listed in your bankruptcy will be extinguished whether the creditor likes it or not. They are prevented from continuing to chase the debt by the Bankruptcy Act.  If creditors attempt to recover money from you, you should advise them of your bankruptcy number and notify your trustee.

A secured creditor with whom you have made arrangements to retain secured property by continuing repayments can contact you if you default on the arrangement.

It is very unlikely that a bank or finance company would be prepared to continue to extend credit to you. All creditors at the date of bankruptcy should be listed on your Statement of Affairs and they will be notified of your bankruptcy. Not disclosing to the bank or finance company you are dealing with that you are an undischarged bankrupt is an offence under the Bankruptcy Act.

Most banks will give you a non-credit bank account as long as you are up-front and disclose that you are a bankrupt.

Before going Bankrupt you should contact any professional bodies that you are registered with to ensure your employment will not be affected. Bankruptcy may prevent you from holding some licences or doing work in certain occupations. If you owe your employer money they will be notified of your bankruptcy but they would not normally be notified if this is not the case. If you fail to pay compulsory contributions your employer will be notified to deduct payments from your wages.

You are obliged to make regular payments or “contributions” to the trustee for the benefit of creditors if you earn an income above the indexed statutory amount.

As a very rough guide, if as a single person with no dependents you earn more than $54000 net of tax, you would have to pay 50 cents in the dollar for every dollar you earn in excess of that. The amounts change regularly and also depend on the number of dependents you might have.

As contributions are enforceable at law if payments are not made voluntarily the trustee can issue a notice on your employer to garnishee your income.

If you are able to pay out your debts from some windfall gain, help from a third party or from your earnings your bankruptcy can be cancelled or annulled.

Applying for credit

It is an offence when borrowing money, purchasing goods on credit or incurring any credit if you do not inform the person you are dealing with that you are an undischarged bankrupt.

Running a Business

Being Bankrupt does not stop you from earning an income by running your own business.  You must disclose your bankrupt status if you trade under a business name either in a partnership as a sole trader.

You cannot be a director of or involved in the management of a company without Court approval.

Change of Name and/or Address

You are required to notify your trustee of all changes of name and/or address.

 Overseas Travel

Generally overseas travel is not permitted during the term of your Bankruptcy. If you must travel overseas you must first obtain written approval of your Trustee.

When do my creditors find out about my bankruptcy?

Usually within 1 or 2 days of AFSA accepting and processing your fully completed documentation and then issuing a Bankruptcy number. The creditors are notified in writing by the trustee and given a statement of your assets, liabilities and debts which you have disclosed.

Yes it does. Your name will be go on the public record (National Personal Insolvency Index). Your name will be on a commercial credit reference agency such as Veda Advantage for 5 years even if your bankruptcy has been discharged.

Your ability to borrow money or buy things on credit, rent a property, or get any utilities connected without paying a bond will be effected. Some banks will not let you operate an account or will restrict how you can use your account. If you have any queries regarding your credit report you should contact Veda Advantage.

Generally no, however your trustee will decide whether there are matters requiring examination before the Official Receiver or the Court.

There are many different types of possible offences that can be committed under the Bankruptcy Act and some of those are listed below:

  • failure to disclose some of your assets
  • intending to defraud your creditors by disposing of property before bankruptcy
  • deliberately obtaining credit when you know you can’t pay
  • gambling and speculation which materially contributes in bankruptcy
  • incurring debts during bankruptcy in excess of the prescribed amount without disclosing that you are bankrupt
  • operating a business under an assumed name, without advising your bankruptcy
  • leaving Australia without the trustee’s permission

The penalties for these offences vary from 6 months to 3 years imprisonment upon conviction.

You are Bankrupt for three years. If your trustee is not happy with the way things have gone over the three years he can object to you being discharged. In that case your Bankruptcy can be extended up to another 5 years.

Bankruptcy is a last resort and has serious consequences.

Active Debt Specialists is the provider of debt solutions to individuals and businesses based in Western Australia.

If you are contemplating Bankruptcy sometime there are better, less disruptive solutions available to you so contact us on 1800 085 550 or complete the short contact form and we will call you.

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  1. Do you have a house or car that needs protection from debt collectors?
  2. Do you have unsecured debts of more than $10,000?
  3. Is your gross income less than $108,000?
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Active Debt Specialists is based in WA, successfully providing debt solutions to individuals and businesses since 1998. We help thousands of Western Australians to resolve their debt, keep their family homes, continue operating small businesses and eliminate financial stress.

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For further assistance we recommend you:

  • Speak to your Creditors
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Please contact us for assistance once you have secured a regular income.

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Unfortunately, we are unable to assist you.

You need to have over $7,000 in unsecured debt to apply.
For further assistance we recommend you:

  • Speak to your Creditors
  • Call AFSA on 1300 364 795
  • Speak with a Financial Counsellor
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  1. Credit cards, store cards and personal loans are types of unsecured debts. Mortgages and car loans are not.