FAQs | Applying for Bankruptcy
- Bankruptcy will give you relief from your insurmountable debt. Your creditors will no longer be able to pursue you for your debts that have passed to your bankrupt estate. What is more, those debts are gone for good. They do not return, ever.
- Bankruptcy will end any garnishee notices creditors have put in place against your wages, giving you more money to live on. For most people who become bankrupt, bankruptcy protects all their income, making their wages available for their everyday expenses, living, and even putting away some savings for a rainy day. If you earn a high income you may be required to pay some income contributions to your bankrupt estate. If this is your situation, you can expect the income contributions to be a small percentage of your take-home pay.
- Bankruptcy will stop legal actions against you for the recovery of the money you owe. If you are owed monies and are taking action for recovery of those monies, you may lose that right unless the action is for compensation for personal injury or wrongdoing against you or your family members.
- Bankruptcy will protect your essential assets that may have been available to your creditors had you not sort the protection of bankruptcy. Protected assets include equity in a car to the statutory threshold currently $8,550, household furniture and personal effects, and tools of trade up to the statutory threshold currently $3,800. If you have unprotected assets, like a boat or caravan, then those assets may pass to your bankrupt estate.
- You can travel overseas whilst bankrupt. You will need to apply to your trustee for written permission before you travel. Normally, obtaining the trustee’s permission will not be a problem.
- You can operate a business while you are bankrupt however you must operate as a sole trader, the business name must include your first and last names alternately you need to tell everyone you deal with that you are bankrupt and your business cannot on-sell stock. While you are bankrupt you are not permitted to be a trustee of an SMSF or a director of a company.
- Your bankruptcy will be recorded on the National Personal Insolvency Index (NPII) which is maintained by the Australian Financial Security Authority.
- Bankruptcy will be recorded on your credit report for 5 years. From our experience, most people who file for bankruptcy already have a poor credit report and bankruptcy gives the opportunity to stop further defaults by removing the debts caught by your bankruptcy and freeing up your wages to enable you to pay your utility bills and other debts on time – stopping further defaults. Long story short, each of the defaults on your credit record will drop off 5 years from when entered and in 5 years’ time with no new defaults happening, you will have a clean credit record. Those who do not seek the protection of bankruptcy will face the prospect of having a poor credit report in 5 years’ time if they have been unable to stop continuing defaults.
For further information on bankruptcy, we recommend our articles ‘Start Working To Improve Your Credit Report As Soon As You Become Bankrupt’, ‘Pathways to Bankruptcy – Essential Facts’, ‘Life During Bankruptcy’ and ‘The Bankruptcy Option Explained’.
Nicholls & Co have a complementary ‘help desk’ to answer your questions on bankruptcy. Call Nicholls & Co on 1300 060 122 or email email@example.com.