A common question that we receive here at Australian Bankruptcy Services is: “What happens to my debts after I go bankrupt?”
The short answer is that some debts will disappear, while others remain attached to your name.
There are two types of debts: secured and unsecured debts.
Do unsecured debts go away after bankruptcy?
Filing for bankruptcy relieves you fully from your unsecured debts. Once the bankruptcy has been formalised, your unsecured creditors can no longer contact you to claim payments. If an unsecured creditor attempts to recover debt from you after you have become bankrupt, you can report them to your appointed Bankruptcy Trustee.
This sounds too good to be true – is there a catch?
Bankruptcy does not clear you of ALL your unsecured debts. You may be required to repay certain unsecured creditors throughout the period of your bankruptcy and even afterwards.
Typical examples are:
- Court fines
- Child support payments
- Student loans
- Centre link debts
What happens to my secured debts after I declare bankruptcy?
Secured debts are those debts that your creditor has backed by collateral as part of the lending terms. A common example is the mortgage you might have taken against your family home.
Under the Australian Bankruptcy Act (1966), secured debts are not protected in bankruptcy – meaning if you fail to make these payments, your creditors can take back the asset and sell it in order to recover losses.
Will The Bankruptcy Act protect me against new debts incurred after I declare bankruptcy?
No. Bankrupts must not accumulate any new debts after they declare bankruptcy and will become fully liable for any debts.
To learn more about bankruptcy, speak to a Registered Bankruptcy Trustee today
Reach our experienced and friendly team of bankruptcy experts today by calling 1800 462 767. We will take the time to explain the ins and outs of bankruptcy to ensure you have a comprehensive understanding of this professional debt solution.
All calls are strictly confidential and free.