If you’re personal or business debts spiralling out of control?
Then you may have been thinking about going bankrupt for some time now but have some nagging concerns about it? Maybe the thought of bankruptcy has crossed your mind at some point, but you have been too afraid to take the next and most difficult step – finding out whether or not bankruptcy is right for you. We know that just the thought of bankruptcy is worrying enough without having it become a reality. We understand that there is a very real sense of failure in this process. Its more than likely you feel stucklike you have no other option. That’s where the team at Bankruptcy Advice Pty Ltd can help you.
You can be completely debt free!
Making a decision like going bankrupt can be a little less painful if you actually take a moment and add up all the debt you have and then work out how long it is going to take you to pay it all off, and if the answer is longer than 3 years then bankruptcy could be right for you. We can help you construct a financial future free from debt where the blocked phone calls are gone and a future where you can look forward to getting the mail again. There are however a few things you should know before you make that very difficult decision to declare bankruptcy. We call these few things the “Bankruptcy – The Facts” or in other words the there are a few critical questions you must get the answer to before you file for bankruptcy. We are offering a free report for you to download to help answer these important questions. Remember the golden rule in all insolvency in Australia the sooner you act the more options you will have.
The “Bankruptcy – The Facts” e-Book will help you get some crucial facts before you file for Bankruptcy.
There are 5 important questions you must have an answer to before you declare bankruptcy. If you want to know what they are feel free to download the free report on the right hand side of this page. It will answer these critical questions in great detail to help give you peace of mind, and that you are making the right decision. Simply fill in the form to the right with your name email and phone number and we will email you a copy of the book right away, we won’t put you on our database and email for the next 5 years. All we may do is call you to see if we can help you with any particular question you may have and that’s it!
Is there any other options besides bankruptcy?
Yes! There may be multiple options available to you depending on your circumstances. Below is a chart outlining all of the pros and cons of various debt solutions. This graph is by no means the full story but it will allow you to make an informed choice.
What is a Personal Insolvency Agreement?
This is semi-flexible financial agreement between you and your creditors (the people you owe money too). A trustee administers to this agreement and helps decide when you need to pay and how much etc. When those conditions have been met you are can begin a payment plan. Wouldn’t it be wonderful if you creditors agreed to settle your debts for 1 cent in the dollar, unfortunately these days it more like 70 to 80 cents in the dollar.
Personal Insolvency Agreements – The Upside
- Avoid bankruptcy
- Possibly limit liability to make income contributions
- You pay back 50 to 70 cents in the dollar to your creditors
- It may be a very a quick process
- You may get to keep important assets
- The debtors assets are independently controlled
- Lower legal costs associated with court proceedings
Personal Insolvency Agreements – The Downside
- You are not free until you have paid the debt
- It may take many years to settle the debt
- It still an act of bankruptcy and will affect your credit rating for 7 years, the same as bankruptcy
- You cannot be a company director until the debt is settled
- You are required to meet with your creditors in person
- Your details will be published in the local paper
What is a Debt Agreement or DA?
This is similar to a personal insolvency agreement where you still have to pay back the debt. A debtor can enter into a legal arrangement with their creditors to a payment arrangement without being declared bankrupt.
Should I enter into a Debt Agreement?
Maybe. There are some things you need to demonstrate for example much like a loan you need to show you have enough income to re-pay the debt, much like applying for a loan. If your debts exceed $100,000 then you don’t qualify. If you are bound by an existing Debt Agreement, or have been bankrupt, you cannot enter into a Debt Agreement. There are also income restrictions, property value and unsecured debt value restrictions. If you want to know more please call us on 1300 879 867.
The biggest and most obvious downside to these you have all negatives of bankruptcy but you still have to pay back the debt, despite the slick television commercials think carefully about this as an option in most cases its not a solution its just moving the problem from a handful of creditors to one creditor, and you are no better off. There are some circumstance when will would advise you to enter into one of these but to be sure give us a call first on 1300 879 867.
Debt Agreements - The Upside
- Avoid Bankruptcy
- Stops creditors – cannot take any further action to recover their debts
- You may get to keep important assets
Personal Insolvency Agreements – The Upside
- There is an upfront charge
- You have to be approved. If you don’t earn enough you will be rejected.
- If you don’t make your payments the agreement may be cancelled, and then the creditors can resume collection of their debts
- The debtor details will appear on the National Personal Insolvency database Index (NPII) from the date that the debt agreement proposal was accepted by AFSA.
- It still affects your credit rating for 5 years, the same as bankruptcy.
- Nothing changes with secured creditors rights. They may repossess if the debtor is in default.
Why do some websites say Debt Agreements or Personal Insolvency Agreements are the way to go?
One of the reasons you find plenty of ads on TV encouraging you to sign up for one of these debt options is simple, there is plenty of money in it for the companies that administer these arrangements, at the very least they take a 20% commission on every cent you pay back. You may also notice, if you haven’t already, that when it comes to financial advice every website or firm tends to giveadvice according to the product or service that they offer. For example Debt Agreement Companies condemn bankruptcy companies and so it goes with much of the financial services industry.
What about a debt consolidation loan?
There may be the occasional circumstance where a debt consolidation loan is a good idea. Generally, however, this option just bundles 3 to 15 different small loans into one great big hard to repay loan. If you are struggling trying to pay all of these different loans now, why do you think it will be magically easier to have one enormous bill? Just to add insult to injury you have to pay up front for the luxury of this option. Generally, however if you are struggling paying your debts you may already have a default on your credit report, so no one will give you a loan anyway.
If you want to get some clarity here simply give us a call on 1300 879 867 ordownload “Bankruptcy – The Facts” e-Book.
If I go Bankrupt can I keep my house?
In many cases these days the answer is yes. If this is a concern for you then the best way to get the answer is to call us on 1300 879 867. Once we have understood your personal financial situation we can give you a clear picture about your house over the phone. Almost everyone is emotionally connected to their home. It’s where the children have taken their first steps, it’s where you live your life. People usually think losing the house or family home is an inevitable consequence of bankruptcy and as a result they push themselves to the brink of insanity trying to avoid bankruptcy at all costs, however it may be possible for you to declare bankruptcy and keep the family home.
Will the bank still let me keep my house even if I’m bankrupt?
Why, you might ask would the bank want bankrupt customers? In an ideal world the bank doesn’t want bankrupt customers, but think of it this way, whether you are bankrupt or not you still pay the bank a heap of interest each month. Wouldn’t they want to sell your house and not take the risk considering I’m bankrupt? Generally the bank that has generously lent you the money for your house is making good money every month in interest out of you, month in month out. As long as you continue to keep up to date with your payments then the bank wants you in your home at all costs. If the bank is forced to sell your home it loses a customer and generally money as they sell the house at whatever they can get for it normally at auction. Ultimately however unless the trustee forces the bank to sell your home because there is too much equity in it or you are very behind on your mortgage it will gladly leave you in your home even if you are bankrupt.
How will I know if I will lose my house?
If you are up to date with your payments then the biggest issue is equity. The trustee has a duty to gather up as much money to help pay your bills once you go bankrupt. Equity is the key here. If you have $300,000 equity in your home and you have $100,000 worth of debts and no other way to pay the debt then the trustee sees your equity as a way to pay back your debt, so the trustee will sell your house pay back the debt and give you whatever is left over
How is equity calculated?
Generally a registered valuer is the best and safest way to determine your current equity position. Maybe before you take the registered valuer step which will cost about $500 it may pay to ask the local real estate agent to give you an idea on what the house would sell for if you had to sell it quickly, there are a few things you need to know about this process so feel free to call us on 1300 879 867 for advice on the best way to go about this process. For a greater explanation about how your house will be considered feel free to download “Bankruptcy – The Facts” e-book.
What if my partner’s name is on the mortgage?
In many cases houses are purchased in joint names. In other words a couple may have purchased a house 50/50 using both incomes to make the payments. If one party declares bankruptcy and the other party doesn’t, the equity is only factored on the 50% of the property. So in other words if you have a house in joint names and your total equity position is $100,000 then your actual equity is half of that i.e. $50,000.
Are there many options when if comes to my home?
There are several options available to you when it comes to your house or any other asset when going bankrupt. You need to get the right advice about this. However, getting it wrong could be disastrous. If you have questions feel free to call us about your house on 1300 879 867.
What will happen to my house at the end of my 3 year Bankruptcy period?
At the end of your bankruptcy 3 year period, you can have your house given back to you this comes at a cost in 2 ways. Firstly you will need to pay the trustee $2-3 thousand dollars to have the title of ownership changed on the deed and then the house is back in your name and its all done. The other factor is if over the 3 years you have been bankrupt your house increases in value you will be required to pay that gain to the trustee before they will put the house back in your name. You need to get the right advice about this. However, getting it wrong could be disastrous. If you have questions feel free to call us about your house on 1300 879 867.
Will my employer be notified?
Who will know about my bankruptcy?
There are four groups of people that will know that you are bankrupt.
- The people you tell.
- Your creditors or people you owe money to.
- The people that see your credit file while your bankrupt. The only way that will happen is if you sign a privacy release for them to access your credit file. You only ever do this when you apply for a loan.
- You will be listed on the National Insolvency Index but anyone seeking information has to pay to see if a person is listed as bankrupt.
At Bankruptcy Advice we are fully aware that there is still a stigma about bankruptcy we understand this concern. We can help ensure that if you declare yourself bankrupt you don’t have to go to court or get your name in the newspapers or be publicly made out to be a criminal. We can help ensure bankruptcy is a simple and quick process. In fact the whole process will only take a few days. It enables ordinary people to get out of debt and on with their lives. For more detailed information about employment download “The Big 5″ e-Book.
Will I lose my job if I go bankrupt?
The answer to the question is sometimes. The problem with some professions isn’t that you can’t do the job any longer, it’s more an issue of professional bodies or associations that view bankruptcy in a dim light and can make it difficult for you. The best option is to check first before filing for bankruptcy. Check if your profession is on the list below. If it is, then contact them personally and explain your situation. Some associations won’t have a problem with your bankruptcy as long as it wasn’t accompanied by shady or questionable behaviour.
If you think you employment may be affected by your possible bankruptcy give us a call on 1300 879 867.
Will my income be affected if I go bankrupt?
The answer to the question is maybe. The first thing you need to know about going bankrupt is there is no restriction on how much you can earn. However, I will point out that your income is a serious consideration when working through whether you need to go bankrupt.
The first thing you need to know is how much you can earn before you have to start paying back money to your creditors via your trustee (see table right).
Net income is the pre-tax / in the hand amount you earn per year. A dependant is someone who lives with you and earns less than $3,124 per year (regardless of their age).
You can apply for a hardship variation that raises the threshold amount if you have expenses such as medical, child care, substantial travel to and from work, or a situation where your spouse used to work but is no longer able to contribute to the household income.
Child support paid to you is always considered in bankruptcy. If you pay child support this will be also considered, for example if you pay $5000 child support each year and you have no dependants living with you then your revised net income limit will be increased to $55,332.10.
If you need more information about your income thresholds go ahead and download “The Big 5″ E-book. There are some circumstances where where it is not economically viable to file for bankruptcy because you earn too much in comparison to the debt you have.
Income Thresholds for Bankrupts. As of April 2016.
Changes are coming to the world of bankruptcy, if you need to know what is happening, then focus here. As of March 2016 there has certainly been developments to the Income Threshold Amounts. This signifies that there are changes to just how much money you can keep when bankrupt, this is essentially your net income following tax and child support (if applicable) is deducted. If you’re in business when bankrupt, then of course it’s also after net (after tax) business spendings, which is normally determined on a yearly basis.
Your net income can be adjusted to take into consideration things like salary sacrifice and high superannuation payments etc. Your net income could also allow for additional unusual costs incurred as a result of being employed, for instance if you are subjected to an unusually high amount of travel costs to get to and from your job this can at times also be considered. Your bankruptcy trustee must ascertain your real net income depending on the bankruptcy rules.
The income threshold figures are also per person, and are regulated by the Government each and every March and September to allow the movements in the cost of living.
As of March 2016 the income thresholds are as follows:
With no dependents your net income can be $54,518.10 net per annum, i.e. that’s an average of $1,048.25 net every week take home pay. This is your spending money. It’s all yours. It’s what you can always keep, and so anything over that amount is partition 50/50 with your bankruptcy trustee to be paid out to your creditors.
With 1 dependent your net income can be $64,331.36 net per annum, i.e. approximately $1,237.14 net every week take home pay.
With 2 dependents your net income can be $69,237.99 net per annum, i.e. approximately $1,331.49 net weekly take home pay.
With 3 dependents your net income can be $71,963.89 net per annum, i.e. about $1,383.92 net every week take home pay.
With 4 dependents your net income can be $73,054.25 net per annum, i.e. approximately $1,404.88 net weekly take home pay.
With over 4 dependents your net income can be $74,144.62 net per annum, i.e. an average of $1,425.85 net weekly take home pay.
If you believe your circumstance is more complex, then feel free to get specialist advice. If you have a particular income question just call us here at Bankruptcy Advice on 1300 879 867.
What can my partner earn if I go bankrupt?
There is no limit to what your partner can earn. Your partner can earn a million dollars and they will not be required to contribute to your debts.
What if my spouse/partner and I both need to go bankrupt? How much of my pay can I keep?
Who is considered a dependant?
Will I lose my business if I go bankrupt?
The short answer is you don’t have to but you do need to get the right advice. Corporate insolvency laws are very involved and you need to tread carefully if you want to continue to be self-employed.
Although it is true you can no longer be the director of a Pty Ltd Company while you are bankrupt, however that doesn’t automatically mean you can’t run your own business as a sole trader and continue to employ staff etc
What if my business has serious debts?
As a part of your bankruptcy we can also help you wipe out your business debts so you can get a fresh start.
Should I put my company into liquidation?
One of the main reasons you may want to consider liquidation as opposed to bankruptcy is because if you liquidate your company it doesn’t automatically mean you need to go bankrupt.
In Australia, businesses that become insolvent have a few options such as liquidation, voluntary administration and so on. If you want to know more about liquidation and company re-structuring check out our Liquidation information section or download “The Big 5″ e-Book. Remember it’s individuals who go bankrupt not businesses.
This is a complicated area so get some expert advice on this one if you have a business. Generally speaking, the debts in a business and personal debts go hand in hand when a business owner goes bankrupt. At Bankruptcy Experts Australia we can help think through this process call 1300 879 867.
What impact will bankruptcy have on my business?
A restriction that applies when you are bankrupt as a business owner is that you can be in your own business as a sole trader only. For some business owners, bankruptcy affects their ability to run the business because of the licensing issues.
For example, if you run a building company, your licence will be suspend once you’re bankrupt and as a consequence you can no longer trade without that licence.
Isn’t it illegal to run a similar business after bankruptcy?
It can be. There are considerations when and if you go bankrupt as a business owner: for example you cannot rack up heaps of debt in your business, then go bankrupt and then open the doors the next day like nothing had happened. You cannot pay one creditor a whole heap of money, and nothing to any one else you owe money to. There are laws in place to prevent what is called phoenix companies popping up out of the ashes of an old company. If you want to know more about this go to the Liquidation section on this website.
Don’t get overly stressed about what you can and can’t do as a business owner, just get the right advice call 1300 879 867.