One appealing reason that people would file for bankruptcy is the possibility of a clean slate. However, whilst bankruptcy does offer some people a chance to start afresh after bankruptcy in regards to their financial situation, it is important to be aware that not all debt is dischargeable, though it does make the debts easier to manage.
The debts that bankruptcy does wipe clean are your provable debts.
Provable debts?
The Bankruptcy Act defines what is and what is not a provable debt: “all debts and liabilities, present or future, certain or contingent, to which a bankrupt was the subject at the date of the bankruptcy, or to which he or she may become subject before his or her discharge by reason of an obligation incurred before the date of the bankruptcy are provable in his or her bankruptcy.”
In layman’s words, provable debts include unsecured debts incurred prior to the bankruptcy such as personal loans, trade debts and credit cards. Secured debts that fall under the category of provable debts are payments such as a mortgage.
After the bankruptcy ends, most provable debts are extinguished. This means that a debtor does not need to pay any provable debts and creditors cannot chase them up and take any further action.
Whilst child support/maintenance debts are provable, they are not extinguished after bankruptcy and are still payable during and after bankruptcy,
Non-provable debts
Non-provable debts are outlined in the Bankruptcy Act to include debts incurred after the date of bankruptcy, debts incurred by fraud and court-imposed fines.
These are debts that can be still be pursued after the bankruptcy date.
Whilst bankruptcy may not give you a perfect clean slate, it will still assist greatly in helping you manage any outstanding debts you may have such as child support, by extinguishing all other provable debts.
ABS assists Australians with the decision to declare bankruptcy or not. With years of experience in helping people through bankruptcy, we can help you understand your situation and explain your options to you. Call us on our 24 hour hotline 1800 462 767 so we can help you today.