Top 4 FAQ’s About Bankruptcy

Insolvency is the situation where a person is unlikely to pay their debts. In many cases a person who is insolvent may be able to pay their debts over a longer period or by restructuring their financial arrangements.

Those who are unable to pay their debts and unable to come to an agreement with their creditors may petition for bankruptcy. Alternatively, creditors may apply to the court for bankruptcy on a debtor.

Bankruptcy is a very serious matter and you must be certain that this is the only remedy to your dilemma because the consequences are severe. This article details 4 of the top 10 questions regarding personal insolvency:

What effect does Bankruptcy have on someone’s life?

During the period of bankruptcy, an undischarged bankrupt is required to comply with the following:

  • Cannot act as a company officer;
  • Must surrender their passport to the Trustee;
  • Any travel overseas must be approved by the Trustee;
  • Cannot trade under an assumed name or registered business name without disclosing they are a bankrupt;
  • Cannot incur credit above the prescribed threshold (currently $5,155) without disclosing they are a bankrupt;
  • Must surrender all books and records to the Trustee as requested, including any related entities and trusts; and
  • Must make all divisible assets available to the Trustee.

Will Bankruptcy affect my credit rating?

Any type of personal insolvency will appear on a person’s credit rating for a period of seven (7) years. In the majority of cases, it will take longer to repay the debts owing. Accordingly, the freshBankruptcy FAQ's start that personal insolvency offers can place people in a better position in the long term.

Will I lose all of my assets?

A person subject to personal insolvency is entitled to maintain some personal effects such as household furniture, clothing and financial assets, such as superannuation and life insurance policies, providing the superannuation fund is regulated. Further any claims for personal injuries are considered a divisible asset in the estate.

Certain assets have a threshold value which includes:

  • Tools of trade to the value of $3,550; and
  • Motor vehicles to the value of $7,200.

The value of these assets, over the threshold, will be realisable by the Trustee.

How does a bankruptcy finish?

Bankruptcy lasts for a period of three (3) years from the date that the Statement of Affairs is lodged, unless an Objection to Discharge is lodged by the Trustee for non-compliance. If an objection is lodged the bankruptcy may be extended to up to eight (8) years.

A bankrupt may end their bankruptcy prior to the three (3) year mark, should they elect one of the following three (3) options:

  • All creditors and costs of the estate are paid in full, resulting in an annulment;
  • A proposal under Section 73 of the Bankruptcy Act 1966 is accepted by creditors for the compromise of their debts; or
  • The Court terminates a sequestration order, if they determine it was obtained unjustly.

 

Contact Us

AIMS Accounting Service
22 Swindon Close
Lake Haven NSW 2263
Phone: 02 4392 8720

Small Business News

Security Colony was one of six cybersecurity companies selected by Austrade & AustCyber to take [...]

Your potential customers will question you or your product before deciding to commit, but most start [...]

After spending decades working in the ‘big end of town’, Sydney barrister Leo Tyndall turned his eff [...]

It’s a startling experience to arrive at work, only to realise that my entire team had suddenly take [...]

The NSW Government has purchased a $3.3 million stake in Wagyu beef agribusiness Stone Axe Pastoral, [...]

Security is an ever-increasing threat for organisations and individuals and with the introduction of [...]

With less than a day until mandatory data breach reporting laws take effect, a cybersecurity vendor [...]

The Workplace Gender Equality Agency (WGEA) has awarded a record number of organisations its ‘Employ [...]