Every year, tens of thousands of Australians become another bankruptcy statistic. But despite these rising numbers, the mechanisms behind bankruptcy, and all of its implications, are often not well understood. This leads to misinformation, misconceptions and unnecessary stress for those who need bankruptcy advice.
The truth is that, just like all things of life, bankruptcy is made up of both good and bad. It is important to be aware of all the facts before deciding to walk down the path of bankruptcy. That is why Australian Bankruptcy Services have compiled their research and knowledge, so that they can present to you the following “Facts About Bankruptcy”.
Bankruptcy Fact 1: Bankruptcy is the process whereby people who are unable to pay their debts receive protection under the Bankruptcy Act 1966 whilst their financial affairs are managed by a Trustee in Bankruptcy.
Bankruptcy Fact 2: Bankruptcy only applies to individuals. Companies cannot ‘go bankrupt.’ They instead become liquidated.
Bankruptcy Fact 3: Bankruptcy can be voluntary or involuntary.
Bankruptcy Fact 4: Voluntary bankruptcy occurs when you realise that you are personally insolvent to the point of being unable to repay your debts, and so make the decision to declare yourself bankrupt.
Bankruptcy Fact 5: As soon as you have been declared bankrupt, creditors may no longer harass you for payments. All interest on your provable debts is frozen from this point onwards.
Bankruptcy Fact 6: In cases of involuntary bankruptcy, a creditor to whom you owe $5,000 or more may apply to a court to have you made bankrupt.
Bankruptcy Fact 7: Your Trustee in Bankruptcy has the task of investigating your financial affairs and determining if there are any funds available in your Estate to repay creditors.
Bankruptcy Fact 8: Assets over a certain value threshold may be seized and sold to repay debts.
Bankruptcy Fact 9: Funds to repay creditors may come from the sale of assets, income contributions (if you earn over a certain threshold) or any winnings or lump sum payments you might receive during the bankruptcy period.
Bankruptcy Fact 10: Any assets transferred to a 3rd party prior to bankruptcy, including property, vehicles and excessive contributions paid into superannuation, can potentially be recovered by your Trustee.
Bankruptcy Fact 11: Bankruptcy generally lasts for 3 years, but can be extended to 5 or 8 years if you commit certain offences under the Bankruptcy Act.
Bankruptcy Fact 12: When an individual is declared bankrupt, their name will be permanently listed on the National Personal Insolvency Index.
Bankruptcy Fact 13: You will need to have the written permission of your Trustee in order to travel overseas.
Bankruptcy Fact 14: You will have a default placed on your credit file for 7 years and as such, your ability to acquire more credit may be impaired.
These bankruptcy facts cover the most important consequences and our most commonly asked questions. If you are considering bankruptcy though, you should call our hotline for free advice. Everyone’s situation is just a little different, so a professional opinion is always recommended – the Australian Bankruptcy Services team can be contacted on 1800 462 767.