How will bankruptcy affect me?
There are a number of implications of bankruptcy, and these will affect different people in different ways. If you have any uncertainty, it is best to talk generally with a Trustee, seek independent legal advice, or contact the Australian Financial Security Authority. Implications of bankruptcy include, but are not limited to, restrictions on obtaining credit (both during and possibly after your bankruptcy ends), prohibitions on being a company director, possible restrictions or suspensions of certain professional membership bodies or other personal accreditations, restriction on overseas travel (unless with the permission of your Trustee), and having to surrender certain assets to your Trustee (known as ‘divisible property’).
What happens to my assets upon my bankruptcy?
Assets which you must make available to your Trustee for the benefit of your creditors as at the date of your bankruptcy include: real estate, motor vehicles (subject to a market value threshold and other conditions), trailers/caravans/boats (possibly subject to conditions), tools of trade (subject to a market value threshold), cash, shares, business assets (if you trade as a sole trader or in a partnership). A number of assets are exempt from being made available to your Trustee, and these include, but are not limited to, essential household furnishings and electrical items, superannuation held in a regulated fund (subject to conditions), personal property of a sentimental nature (subject to conditions), some damages claims, and property which creditors agree you can keep.
What happens to my house?
The Trustee will generally register themselves on the title of the property and take steps during the bankruptcy to sell your interest in the property. The Trustee may firstly attempt to sell your interest on to the co-owner or another party via an off-market transaction, prior to listing the property on the open market.
Can I continue being employed?
Yes, you may continue to earn an income. However, if you earn above a certain net income threshold, you are required to pay half of your net income earned above that threshold to your Trustee for the benefit of your bankruptcy estate. Assessments are conducted on each 12-month anniversary of your date of bankruptcy.
Thresholds rise in increments based on the number of dependants that you have. The thresholds are periodically indexed. As at 20 March 2016, the net annual income contribution threshold for a bankrupt with no dependants is $54,418.10. The highest threshold applicable for over four dependants is $74,144.62.
What happens to my debts?
Creditors with the right to prove as creditors of yours as at your date of bankruptcy are required to provide your Trustee with details of their claims. It is important to note that not all of your debts may be provable claims, and therefore those debts will remain with you irrespective of your bankruptcy. Such debts may include fines, child support-related payments, and some portion of a Higher Education Contribution Scheme debt.
How does my bankruptcy end?
Typically, a bankruptcy will end by automatic discharge which occurs three years’ after your completed Statement of Affairs form has been lodged and accepted by the Australian Financial Security Authority. Other ways in which your bankruptcy may end include by annulment, which generally requires your creditors to agree to accept a proposal you put to them during your bankruptcy or the Trustee is able to pay all your creditors’ provable claims in full.