Do you have a rental property and you are unsure how the income will be dealt with in bankruptcy? We are often asked about what happens to rental income in bankruptcy, so we have prepared this post to answer the most common questions.

Can I keep rental income from an investment or rental property?

The short answer is no! When you declare bankruptcy all property will vest in the Trustee in Bankruptcy (except protected property). Property which vests in the Trustee in Bankruptcy must be realised for the benefit of creditors and this includes rental income from a rental or investment property.

How can I protect rental income during bankruptcy?

If the rental property is registered in your name (and you declare bankruptcy), then unfortunately you will not be able to protect the rental income. However, if the rental property is registered in joint names (ie in your name and your spouses’ name) then your spouse would be able to make an offer the purchase the equity in the rental property. If your Trustee in Bankruptcy accepted this offer, then all future rental income could be paid directly to your spouse.

If you are thinking about bankruptcy and are concerned about your rental income, there may be other options. At the Australian Bankruptcy Services we have a registered trustee in bankruptcy on site who can answer your more complex questions. Call today on 1800 462 767 if you have a rental property and are considering bankruptcy.

If you or your spouse are contemplating bankruptcy and you want to understand how will bankruptcy may affect yourrental income, then call us today on 1800 462 767 to discuss your options.

All calls are free, entirely confidential and if required, anonymous.