When you are a bankrupt person you no longer have to make payments toward your provable debts. Provable debts generally take the form of unsecured debts such as credit cards and personal loans, but can also include any actual or contingent shortfalls from secured debts such as home mortgages and car loans. But bankruptcy was not designed to get you out of paying your debts, rather, it is a way to ensure that any available money you do have is fairly distributed amongst your creditors. Some people, then, may find themselves having to make payments from their income to their Bankruptcy Trustee.

Bankruptcy generally lasts for three years, and every year of your bankruptcy your Trustee will do an assessment on your income. It is also your responsibility to inform your Trustee if there is a change in your income. If you earn over the threshold amount, which is indexed every six months or so, you will be required to contribute a portion of your income into your bankrupt estate. Put very simply, the more you earn beyond the threshold, the more you are required to contribute, although there are some factors that affect your contribution obligation. Having people financially dependent on you is one such factor – the more dependants you have, the less your required contribution. Child support is another factor, and again, the more you pay, the less your bankruptcy contributions. Note, though, that if you have part custody for a child that you also pay child support for, you cannot claim both factors.

For some people, calculating their compulsory income contributions can be quite complicated, but the Trustee in Bankruptcy is fully equipped to do so. We have however developed an on-line contribution calculator and we encourage you to use it to give you a guide as to whether you will become liable for compulsory contributions.

Other sources of funds for your bankrupt estate include equity in assets that you own, shares and other investments, and any winnings or substantial payments you might receive during the term of your bankruptcy. Disposing of any assets in an attempt to keep them from your creditors, and failing to properly disclose your income, are offences under the Act.

For more information on compulsory income contributions call the Australian Bankruptcy Service today on 1800 462 767.

Our trained consultants can give you confidential and obligation-free advice on all matters pertaining to Bankruptcy.