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Bankruptcy Explained
The Bankruptcy Act 1966 provides a solution to those faced with debt they can not repay; voluntary bankruptcy. Voluntary bankruptcy provides a way of being released from most of your debts. This gives you a “fresh start”. Once your bankruptcy goes through, your debts are wiped and creditors cannot take legal action against you. They must also stop contacting you. If they continue to contact you, report them to your trustee.
What debts are included in a bankruptcy?
Almost all debts are able to be included in a bankruptcy; credit cards, unsecured personal loans, personal tax debts, GST debts, repossessed car loans etc.
Centrelink debts are also covered by bankruptcy.
What debts are excluded from Bankrupcy?
Debts that are not able to be included in a bankruptcy include:
Current bills (phone, electricity, gas) are not debts and should not be included in a bankruptcy. If you do include them you may cause that service to be disconected. It is best not to include them in bankruptcy.
Will someone come around and take my assets when I go bankrupt?
The short answer is no. All normal house hold items are protected in bankruptcy (furniture, appliances, etc). A car up to a value of around $6,700.00- wholesale price is also protected. Tools of trade are protected in bankruptcy up to a value of $3,350.00
What happens to my car loan in bankruptcy?
In bankruptcy you can generally still keep the car when you go bankrupt, as long as you continue to make the repayments on the loan. You should talk to us to get a better understanding as to where you stand here.
What will bankruptcy do to my Credit Rating?
Your bankruptcy will be noted on your Credit Reference Record and remain there for 7 years.
How much am I able to earn during bankruptcy?
There is no income restriction in bankruptcy but once you start earning over a certain threshold you will be required to make a contribution to your creditors. Bankruptcy contributions work like our tax system. Income up to a certain threshold is protected; above the threshold, 50% of that money is taken. These restrictions only apply for three years.
For updated thresholds please refer to the ITSA (Insolvency and Trustee Service Australia)
What happens if I forget to include a debt in my bankruptcy?
If you forgot about a debt and remember it later, you should contact your trustee as soon as possible so that it may be added to your list of creditors.
Is there any money that my creditors cannot touch?
Personal injury compensation is protected from your creditors in bankruptcy and they can’t touch anything you bought with it. All superannuation is protected from your creditors in bankruptcy. If you apply for early realease of superannuation this money is no longer protected.
What will happen to any tax refunds during bankruptcy?
If the tax office is one of the creditors in your bankruptcy, any refund you are entitled to during the period of bankruptcy will be kept. After 3 years, any debt still owing is written off. Tax refunds after bankruptcy discharge may be retained by you. Tax refunds received by you during the period of bankruptcy will also be treated as income for income assessment purposes. Regardless of bankruptcy, you are still responsible for lodging your Income Tax Returns.
Will bankruptcy affect my Centrelink benefits?
No. Centrelink benefits are protected under bankruptcy
Can I operate a business while I am bankrupt?
If you operate a business while in bankruptcy you must trade under your own name and as a sole trader. While in bankruptcy you can not be the director of a company.
Can I travel overseas during bankruptcy?
If you travel overseas during bankruptcy it should be for business or family reasons. You have to apply to your bankruptcy trustee and they would be unlikely to let you go for a holiday in Fiji if you just filed for bankruptcy.
Who will be my trustee during my bankruptcy?
ITSA will more than likely be your trustee.
Can I have my bankruptcy cancelled?
Yes, if you pay out all of your debts, including costs.