When you are made bankrupt in Australia you will be released from all of the debt that you have. There are a couple of consequences to this happening and that is something that we will discuss soon. For now though I do wish to highlight the two situations in which you can be made bankrupt in this country:
Many Australians incorrectly believe that bankruptcy is the best way in which to deal with extreme debt issues. However this idea could not be further from the truth. Sure, there are a few people out there who will get a ‘fresh start’ when declaring bankruptcy, there are many more out there who will have their life severely impacted for at least seven years, in some cases the ramifications of declaring bankruptcy may stretch far beyond this and could have an impact for a significant portion of your life. It is important that you try every possible solution before bankruptcy is declared. The vast majority of companies will be more than happy to work with you if you have some sort of debt consolidation in place as it means that they do have a chance of getting at least some of the money that you owe them back.
The vast majority of people who are made bankrupt will have difficulty applying for credit for at least seven years (as this is the length of time that bankruptcy will remain on your credit report), you could also lose a number of your assets (more on that soon), and your ability to be employed in the future may also be severely hampered.
Bankruptcy does have both advantages and disadvantages. It is worth knowing what they are before you determine whether this is the right course of action for your own personal situation.
As mentioned before, your bankruptcy will be recorded on your credit report. It will also be added to the ‘National Personal Insolvency Index’. It will appear on the former for at least seven years, and it will stay on the latter for life. However it is worth noting that most lenders will only really pay attention to your credit report, although there are a few out there who will also look into the National Personal Insolvency Index in conjunction with this. Bankruptcy will remain on your credit report for 2 years longer than any bad debt that you may have. This is another reason as to why you should try and sort out the situation as opposed to just dealing with bankruptcy.
If you have an income of over $52,543.40 and you have zero dependents (the income level is slightly higher when you have dependents) then you will be asked to pay some of this income to your assigned trustee who will then utilize the cash to pay off any debts that you may still have with your creditors. It is worth noting that some debts will not actually be eradicated. These include:
You will continue to pay these as you did before you declared bankruptcy. The rest of your creditors will be dealt with my your assigned trustee.
In the next section we will discuss the potential of losing some of the assets that you may own.
It is worth noting that the values listed here are correct as of the 10th June 2014. Depending on when you read this the asset value limit may have gone up or down.
When you are declared bankrupt your assets will come under ‘threat’. Some of your assets will be safe from being used to pay off the debts that you owe, but there also a few which you will most likely end up losing.
There are a number of assets that the trustee will be able to seize when it comes to paying off any outstanding debts. The assets that they seize will actually depend on the size of your debts. Obviously they will not seize your property if your debts are $5,000 because you will most likely be able to pay that off by selling other assets:
As mentioned previously, you may also find that your employment status is impacted as a result of bankruptcy. It can be impacted in one of two ways: