You can become bankrupt within 10-14 days, and the first step is getting a bankruptcy trustee. Perhaps you will choose me.
As a result, almost all your debts (debts and liabilities – or ‘provable debts’, in bankruptcy terms) become owed by your bankrupt estate, not by you. You are now debt-free, or almost debt-free.
There are exceptions: anything you owe to Centrelink, Child Support, and HECS. Court-imposed fines and debt as a result of fraud are also not covered.
If you want to keep an asset that is allowed under the law, such as a car and maybe your house, you must continue to pay for it. This is called ‘secured debt’ and I will cover them later. For now, we’re most concerned with the most common type of debt – unsecured debt.
This is the dead-end sort of debt that burdens most people and what I come across most of the time: credit card debt, tax debt, store card debt, phone debt, personal loan debt, and the like. Does that sound familiar?
When you go bankrupt this sort of debt is simply canceled immediately as far as you are concerned. You personally don’t owe it anymore – full stop! Instead, your bankrupt estate owes it, and your trustee will manage it.
One thing is very important to note: if you have been paying any of this type of debt by direct debit, go to the bank and cancel the arrangements.
This is extremely important as with both the alternatives to bankruptcy – Debt Agreements and Personal Insolvency Agreements – you are not released from your debts until the final repayment is made. That could be five years or longer.
Once the bankruptcy is in place, your bankruptcy number and date of bankruptcy are recorded on the government’s database – the National Personal Insolvency Index (NPII). You are there forever. It is a public document and can be accessed if a fee is paid, but this rarely happens.
What it does mean is a black mark against your name with the commercial credit rating agencies. It’s there for five years. That’s the credit rating to worry about. You may already be listed as having bad credit risk.
Once you have gone bankrupt, your creditors are not allowed to contact you about your debt – and they cannot reappear in three years’ time.
Your trustee will secure any assets that will be part of your bankrupt estate and begin managing it while you put the stress of unpaid debt behind you, and get on with life.
There are other options apart from bankruptcy but in most cases, I believe bankruptcy offers the most effective solution. It provides an immediate release from the debt and recognises you as a human being.
It also allows you the chance to earn a minimum level of cash-in-hand income (always more than $1,188.25 a week) and to keep certain property so you can live properly.
Once you have the protection of bankruptcy, you will find your focus will change from constant worry about the debt to regrouping, living your life, and recovering from the financial distress. Life will be happy and productive again, and you will regain your self-esteem.