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WHAT HAPPENS WHEN I AM BANKRUPT

After you have been accepted for Bankruptcy you will receive an email or letter with your Bankruptcy number and a date.

You will be automatically discharged in 3 years if you have followed your Trustees directions, replied to their requests and paid any amounts that have been proven to be owing to the Trustee.

You may then receive a letter or email from the Trustee requesting more Information. The Letter has strong wording (as it legally must) on the repercussions of not following the Trustees Directions. Don’t panic you just need to comply with the directions.

If you do not follow your Trustees directions or pay any money that might become Liable, or you to hide money or assets, or deliberately give incorrect information, the Trustee can extend your Bankruptcy until he is happy that you have complied with all legal responsibilities. This could be an additional 2 or 4 years, maybe longer.

If you have sold a property or closed down a business, or look to have other assets the Trustee may investigate further and ask for more details, Bank accounts or other information. You must provide this.

It is normal at the end of each year of the Bankruptcy to receive a request for Payslips, Group Certificates, and bank accounts to confirm what income you have received in the past year. If you earn over a certain limit you will be expected to pay 50% of the over-limit amount, after Tax.

If your income is already over the limit, the Trustee may ask you to start a payment plan, so that you don’t get caught with a large amount at once. Remember that Holiday Pay, Retrenchments, Long Service leave, and inheritance can fall in one 12month period and cause you to go over your income threshold. It is best to avoid big lump sum payments during your Bankruptcy period.

If your Car or Home has equity you may have made an offer to make a payment or payment plan to pay off the equity balance, so that you can keep your home or Car. Make sure you have a letter from the trustee that this removes any further claim on these assets.

If your home has no equity at the start of the Bankruptcy you may not be asked to make a contribution or payment initially. But be aware if the property appreciates in value over the 3-year period, especially in a property boom, you may then be asked for a Contribution based on the increase in value just before discharge.  Sometimes it better to have made an agreed payment plan to the Bankrupt estate to release any claim on your home. This is not always possible, but you should be aware of what may happen.

If you need to travel overseas during your Bankruptcy period you will need to apply to AFSA and email or post in the form “Consent to travel overseas whilst Bankrupt”. You will need to pay $150 at the time we wrote this article. As long as you have followed any Instructions from your Trustee it is normally not a problem. Do this a couple of months before you leave to be on the safe side. Form available at afsa.gov.au or ring us.

If anyone checks your Credit Report, it will say exclusion due to Bankruptcy. This will generally prevent you from borrowing any money. Once you have been discharged it remains there for another 2 years and will generally prevent you from borrowing any unsecured loans or cards. However, Home Loans and Car Loans may be available from Specialist Lenders through this transition period.

You will not be able to operate a company as a Director. Think twice about getting your wife or partner to take over a company as this often leads to their Bankruptcy. You can start a business as a Sole Trader using your own name.

Your Partners credit file is not impacted by your Bankruptcy. But they generally will not be able to use your income in a loan application when they apply for a loan. So when your partner applies for a loan, it must be structured on their Expenses and Income alone. Talk to Money Buckets first.

If you have had Money Buckets assist in the Bankruptcy preparation for this, we can guide you through this period.

This advice is general advice only, it’s on common situations and questions we encounter frequently and should not be relied upon as legal advice. You should contact Money Buckets so that we can assess your situation Individually or so we can get further legal advice. This advice was prepared Aug 2019.

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