Can a creditor still contact me insisting on payment once I have become bankrupt?

When you become bankrupt, you are released from those debts that are known as “provable debts”. A provable debt is a debt that you are liable for, or will potentially become liable for, at the time that you are declared bankrupt. If you have a provable debt with a creditor they are no longer able to contact you and demand payment for that debt.

This does not mean that you are released from all of your debts. Certain debts are not “provable” in Bankruptcy, such as child support and some fines. If you go bankrupt, you will still need to organise payment for these sorts of debts.

Another aspect of the Bankruptcy Act is that it does not stop secured creditors from realising their security. Secured creditors are those that are able to sell some sort of asset attached to the debt if you do not pay it, such as a home or a vehicle. If you go bankrupt and you have secured debts, you can continue to pay them in order to keep possession of the asset, so long as the asset does not have available equity in it that is over an allowed amount. If you do not continue to pay it, the secured creditor can repossess and sell the asset. If there is still an amount left over after selling the asset, then any “shortfall amount” will become “provable” in your bankruptcy, and the creditor will not be able to demand that you pay it.

The most common provable debts are unsecured debts such as credit cards, personal loans and store cards. If any such creditor contacts you after you have been made bankrupt, you should immediately refer them to your Bankruptcy Trustee. You should note, though, that if any debts are in joint names, the other party will continue to be chased for payment. Also, bankruptcy only covers those debts that you are liable for (either currently or contingently) as at the date that you go bankrupt – any debts incurred after that date will remain your responsibility, and those creditors will still be able to contact you for payment.

For more information on your rights and obligations as a bankrupt person, and on what sorts of creditors you will be protected from under bankruptcy, call the Australian Bankruptcy Service today on 1800 462 767. We are available 24 hours a day, 7 days a week.




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