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Bankruptcy Assistance Australia

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Do any of these apply to you?

If any of these apply to you, bankruptcy may be the best way for you to get rid of your debts and get on with your life.

Bankruptcy gets rid of your credit card, personal loan and unsecured debts so you can make a fresh start.  No more phone calls and harassment from collection agents and creditors, you can rebuild your finances and start living again with peace of mind.

Bankruptcy has very serious consequences, please don't take this step without exploring all of your options.  To find out more about bankruptcy and explore the available alternatives to bankruptcy simply fill out the Debt Control form and a consultant will contact you to help you explore all your options.

Cooling Off Period

If you are thinking about becoming bankrupt the law allows for a 7 day "cooling off" period to minimise the chance of mistaken or unintended bankruptcy. The option of this 7 day "cooling off" period is only available to you once in a 12 month period. You sign a statement declaring your intention to petition for bankruptcy at the Insolvency & Trustee Service Australia ('ITSA'), in your local area. This gives you a 7 day period to consider your position and obtain advice. Creditors can take no further direct action to recover their debt during the 7 days. You then consult your creditors to see if you can come to a repayment arrangement that you can afford. An accountant or financial counsellor can give you financial advice and assistance. You can also obtain information from ITSA or a registered trustee on alternatives to bankruptcy and on what happens should you go bankrupt. Legal Aid may be available. You are under no obligation to become bankrupt at the end of this period.

1. How do I become bankrupt?

You can become bankrupt voluntarily or you can become bankrupt on the actions of a creditor. If you have considered the alternatives and have decided that voluntary bankruptcy is your best option you will need to complete a Debtor's Petition and Statement of Affairs. This may be done by contacting either a registered trustee or the Insolvency & Trustee Service Australia, in your local area.

You will need the name, address, and amount owed to each of your creditors. You must show all debts for which you are personally liable, whether business or personal. There are severe penalties including imprisonment for failure to disclose property or concealment or unlawful disposal of property or any item of value. You will need full details of your income, personal property which includes such things as house, car, bank accounts, shares, and any money owed to you.

Following completion of the Statement of Affairs, Debtor's Petition and signing the acknowledgement that you have read and understood the Prescribed Information, you can either post or hand deliver your documents to ITSA in your local area.

When the forms are accepted by the Official Receiver in Bankruptcy you become bankrupt. You will then be informed by your trustee of your bankruptcy and the number to use in future correspondence.

2. Is there a Minimum amount I need to owe before I can go bankrupt?

No. You can become bankrupt voluntarily owing any amount. A creditor cannot make you bankrupt unless the debt is $2,000 or more.

3. Who would handle my Bankruptcy?

Your bankruptcy will be handled by a registered trustee you see prior to your bankruptcy who consents to administer your estate or ITSA if no registered trustee consents. ITSA's fees for administering a bankruptcy are set out in the Bankruptcy Act and are paid from any monies received in your bankruptcy. The fees are $4,500 plus a percentage on a sliding scale of monies received in excess of $4,500. Registered trustees generally charge fees on hourly rates.
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4. How long would I be bankrupt?

The period of a bankruptcy is 3 years from the date a statement of affairs is filed. This period may be extended by an objection entered by the trustee. You may apply for an early discharge after 6 months from filing your statement of affairs.
Objections will extend bankruptcy

To 5 years from the date of filing a statement of affairs if a bankrupt:

To 5 years from the date of returning to Australia:

leaves Australia and does not return

To 8 years from the date of filing a statement of affairs if a bankrupt:

To 8 years from the date of returning to Australia

Note: The bases for an objection altered on the 5th of May 2003 to include additional provisions. The changes now include 'special' provisions that cannot be overturned by a review of the Inspector-General. 'Special' provisions result in an 8 year bankruptcy.

Early Discharge

Note: The early discharge provisions will not be available for bankruptcies that are registered with the Official Receiver on or after the 5 May 2003. These provisions will however remain available to existing bankruptcies as at 4 May 2003.

The trustee will determine whether or not a bankrupt meets the requirements for an early discharge if an application is made 6 months, or later, after the filing of a Statement of Affairs. The tests which must be satisfied are that:

6. What Happens to my debts after bankruptcy?

After bankruptcy you are discharged from all provable debts. Probable debts are debts for which a claim can be made in your bankruptcy. Your trustee in bankruptcy will pay dividends to your creditors in accordance with the Bankruptcy Act IF sufficient funds are recovered.

Unsecured Debts

An unsecured debt is a debt that is not secured by any assets eg your credit card, personal loans. Unsecured creditors generally do not have the right to take back the item you purchased from the funds advanced by them They can take no further action against you to recover the debts and may lodge claims in the bankruptcy.

Secured Debts

A secured debt is a debt secured by an asset that entitles the secured creditor to take and sell the asset if you fall behind in payments.

For example, creditors who hold security over your assets, (such as mortgages, bills of sale) and creditors for hire purchase or lease agreements, can recover the property and sell it. They are then entitled to lodge a claim for any loss incurred. If you wish to continue to use these assets you will need to negotiate with the secured creditors and make regular payments to these creditors. If the value of the asset exceeds the amount required to finalise the agreement, during your bankruptcy, the trustee may sell the asset.

Debts not covered by bankruptcy.

Very important exceptions are fines for breaches of the law, debts arising from fraud, maintenance payments or Child Support and debts due to the Department of Social Security (Centrelink). Bankruptcy does not protect you from payment of these debts, and you are still liable for these. The other exceptions are secured creditors (details above), accumulated HECS (Higher Education Contribution Scheme) debts which had been raised before your bankruptcy and Student Supplement Loans - Ask the Australian Tax Office if you need more information

If you have unpaid accounts relating to housing or essential services such as electricity, telephone or gas the supplier may require payment of the account or a bond for the service to be maintained.
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7. What happens if someone has Guaranteed some of my debts?

Bankruptcy does not affect the rights of a creditor to claim under a guarantee. The creditor is entitled to recover payment from the guarantor. Once payment has been made, the guarantor steps in the shoes of the creditor and is able to lodge a claim in your bankruptcy for the debt paid.

8. Someone else also signed the loan agreement. Will they have to pay if I declare myself bankrupt?

Generally, yes. They will still have a liability for the total amount outstanding on all debts incurred in joint names.

9. What about debts incurred just before bankruptcy?

If you are already insolvent, that is you cannot pay your debts, you should not incur further credit because if you become bankrupt it may be an offence under the Bankruptcy Act, and you may be prosecuted.

10. What Happens to a debt I forgot about at the time of becoming bankrupt?

If you forgot about a debt and remember it later, you should contact your trustee as soon as possible so that it may be added to your list of creditors. Failure to disclose debts may effect your eligibility for an early discharge, and could extend your bankruptcy to 5 years.

11. What about Debts Incurred after Bankruptcy?

If you become bankrupt you will be responsible for any debts incurred by you after bankruptcy.
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12. Can a creditor still contact me insisting on payment once I have become bankrupt?

No. The Bankruptcy Act prevents creditors from recovering money from you. An exception is a secured creditor with whom you have made arrangements to retain secured property as per paragraph 6. If other creditors attempt to recover money from you, you should advise them of your bankruptcy, and if they continue to insist you should notify your trustee. If physical harassment occurs, you should contact the police.

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13. Can I continue to use my credit cards after bankruptcy?

It is a matter for the issuing bank or finance company as to whether they are prepared to continue to extend credit to you. All creditors at the date of bankruptcy should be listed on your Statement of Affairs and they will be notified of your bankruptcy. It is an offence for you to incur credit over $4,067.00 (indexed) without disclosing to the person you are dealing with that you are an undischarged bankrupt.

14. I've had a car accident and the owner of the other car is pressing me for the costs of repairs. Will the debt be covered in bankruptcy?

The debt is covered by bankruptcy only if a court judgment has been obtained, or you have admitted responsibility for the debt in writing or started paying for repairs prior to bankruptcy.

15. Will I lose my assets?

Once bankrupt you can no longer sell or deal with most of your assets or items of value, the exceptions being property protected under the Bankruptcy Act, as shown below. Only the trustee (ITSA or a registered trustee), or a secured creditor is able to do so. The trustee may dispose of your property for the benefit of creditors. See paragraph 6.

Assets include anything of value belonging to you at the date of bankruptcy together with assets acquired by you before your discharge including lottery wins, prizes of value etc. Your interest in the family home, land, money in bank accounts, vehicles exceeding the prescribed amount in value, stocks and shares, antiques and other personal property of saleable value are all included. Any interest you have or acquire during bankruptcy as a beneficiary of a deceased estate belongs to the trustee.

Certain assets are protected by the Bankruptcy Act which means they cannot be sold by your trustee to pay creditors. The property protected by the Bankruptcy Act includes necessary household furniture, personal effects, limited tools of trade, life insurance and superannuation policies and the primary means of transport up to the prescribed amount in value (eg. car or motor bike).

16. Will I lose my house?

The trustee has to deal with any equity or interest you have in a property, for the benefit of your creditors. This may mean that the property has to be sold. If the property is jointly owned the trustee may consider selling his interest in your property to a non-bankrupt joint owner. A house property that is subject to a Defence Service Homes mortgage cannot be sold by the trustee without the approval of the Secretary of the Department of Veterans' Affairs.
A secured creditor could sell your property should you be unable to meet the mortgage repayments. Any shortfall will be a debt in your bankruptcy. If a surplus exists following sale, these monies will be paid to your trustee.

17. What if I have a car?

Once you become bankrupt, a vehicle which is used primarily as a means of transport (eg. car or motor bike), is protected and can be retained by you where your interest in the vehicle is less than the prescribed amount. Where the interest in the vehicle is valued at more than the prescribed amount, the trustee is required to sell, and give back to you the value of the prescribed amount and retain the balance for the benefit of your creditors. If the vehicle is jointly owned by two bankrupts the relevant value is double the prescribed amount. (see current amounts to determine the amount for a vehicle used for transportation under s116(2)(ca). This amount is adjusted in accordance with the Consumer Price Index).

18. Can I have a bank/cheque account?

In most cases, yes, with the agreement of the financial institution. However, any substantial funds accumulated in a bank or similar account may vest in the trustee as an after-acquired asset.

19. How does bankruptcy affect my employment?

Your bankruptcy may prevent you from undertaking employment in certain occupations or holding various licences.
Your employer is not normally notified of your bankruptcy unless you owe him/her money or unless you have failed to pay compulsory contributions. It is still your responsibility to lodge taxation returns.
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20. Do I have to make payments from my income to the Trustee?

One effect of bankruptcy is to take the pressure off you to make payments to most of your creditors. If you earn an income you are obliged to make regular payments or "contributions" to the trustee for the benefit of creditors (see current amounts for current income threshold amounts). By law contributions are enforceable if your income is in excess of a statutory amount and may be directly deducted from your income if payments are not made. It is an offence for an employer to dismiss a bankrupt because the trustee has issued the employer with a notice to forward payment from the bankrupt's wages. In order to assess the contribution payable, a bankrupt's income is broadly defined to include money received from their employer and any other benefit, for example the private use of a motor vehicle or subsidised housing. Other factors are then considered and include the amount of income tax payable, maintenance payable, and the number of your dependants.

21. What if I leave my employment during bankruptcy?

Should you terminate your employment during the period of your bankruptcy any lump sum termination payments due to you will be claimed by your trustee.

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22. What happens to any assets that have not been sold by the trustee at the date of my discharge?

Your discharge from bankruptcy does not return those assets to you. The trustee may sell such assets after the date of your discharge.

23. Can my bankruptcy be cancelled or annulled?

If you strive to pay your debts your bankruptcy may be annulled. Your trustee can issue a certificate of annulment when:-

24. What are my rights and responsibilities once bankrupt?

Borrowing Money

When you are borrowing money, purchasing goods on credit or incurring credit in any way exceeding $4,067.00 (indexed) it is an offence unless you inform the person you are dealing with that you are an undischarged bankrupt.

Operating a Business

You can still operate a business while bankrupt. If you trade under an assumed name or business name either as a sole trader or in partnership, you have to disclose to all, your bankrupt status. You cannot be a director of a company or be involved in its management without the permission of the Court. (Corporations Law).

Change of Name, Address and Overseas Travel

You are required to notify your trustee of all changes of name and/or address. If you wish to travel overseas you must obtain the permission of the court if you are required to make compulsory contributions otherwise you require the written approval of the trustee administering your estate.

25. When are the creditors notified of my bankruptcy?

The creditors are notified in writing as soon as possible by the trustee and informed of the assets and liabilities disclosed by you on your statement of affairs.

A creditor has the right to on sell your debt to another agency. Creditors have a tendency to on sell debts in bulk and do not always inform the purchasing agency which debts are covered by an existing bankruptcy or other formal arrangement under the Bankruptcy Act, 1966. As a consequence, bankrupts, discharged bankrupts and/or debtors will receive a letter of demand or telephone call requiring payment from the purchasing agency. Should this occur, it is important that the purchasing agency is provided with your bankruptcy or formal arrangement details (ie Part X, Part IX) and/or have the purchasing agency contact the originating creditor to confirm the information.

26. Is my bankruptcy advertised?

Generally no, however your trustee may choose to do so.

27. Will I have to appear in Court?

Your trustee will decide whether there are matters requiring examination before the Official Receiver or the Court. If, for example, investigations into your affairs are needed you may be required to attend an examination or an interview.

28. Are there offences under bankruptcy?

Yes. The most important are listed below:-

The penalties for these offences vary from 6 months to 3 years imprisonment upon conviction.

29. What happens to my Credit Rating?

Defaults are listed for 5 years on a commercial credit reference record, however, bankruptcy and other serious credit infringements are recorded for 7 years. Your name will be listed for 7 years from the commencement of your bankruptcy even if your bankruptcy has been discharged. Lenders may limit your ability to borrow money or buy things on credit and you may find it hard to rent, or get electricity, water or the telephone connected, without paying a bond. If you have any queries regarding your credit rating after discharge you should contact Baycorp Advantage on (02) 9464 6000.

30. What happens to my ABN or can I apply for an ABN now that I am bankrupt?

If you have an existing ABN when you become bankrupt, the trustee will advise the Deputy Commissioner of Taxation of your bankruptcy. The Tax Office will note the date of your bankruptcy against the ABN. If you wish to continue to use the ABN you will need to contact the Tax Office and arrange to have your ABN reactivated. Regardless of Bankruptcy you will still be responsible for lodging your BAS Statement.

There is no restriction on applying for an ABN after becoming a bankrupt.

31. What if I get a tax refund?

If the tax office is a creditor of your bankruptcy, any refund you are entitled to during the period of bankruptcy may be retained by the tax office to offset the amount owing. Tax refund received by you during the period of bankruptcy will be treated as income for income assessment purposes. After discharge, any debt still outstanding to the tax office which formed part of the bankruptcy cannot be recovered by the tax office. Tax refunds after discharge may be retained by you. Regardless of bankruptcy you are still responsible for lodging your Income Tax Returns.

32. What happens if I have transferred my house or another asset of value to my spouse prior to bankruptcy?

The trustee has the power to void transactions made within a period of 5 years prior to the bankruptcy. The trustee will investigate the transfer and may recover the asset if the transfer was to defeat creditors or if the consideration for the transfer was less than the market value or if it was in preference to other creditors. Disposing or transferring property prior bankruptcy with intent to defeat your creditors is an offence under the Bankruptcy Act.

33. I have been served with a Summons to attend court for an Oral Examination. Do I still have to attend now that I am bankrupt?

Yes. It is recommended that you still attend the court on the day and advise them of you bankruptcy. You may be required to produce a copy of the trustee's letter confirming your bankruptcy.

Explore the Alternatives to Bankruptcy

To explore the alternatives to bankruptcy, simply fill out the Debt Control form for a free assessment, a Debt Control consultant will contact you and help you explore all the available debt relief options.

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