Bankruptcy FAQs
- How does someone become bankrupt?
- A person can voluntarily become bankrupt, or a person can be made bankrupt by a creditor (or creditors) owed over $5,000.
A person who wants to voluntarily become bankrupt can do so by completing a Debtor’s Petition and a Statement of Affairs (which is a form setting out the person’s assets, creditors and other information) and filing these documents with the Australian Financial Security Authority, which is a Commonwealth Government agency.
- What are the benefits of bankruptcy?
- Bankruptcy provides for the discharge from most, if not all, of a person’s unsecured debts, which allows for the person to make a fresh start without the burden of debts which he or she cannot pay.
- What assets will be sold in bankruptcy?
- In bankruptcy all of a bankrupt’s divisible property will be sold or realised by the bankruptcy trustee, including a bankrupt’s house or land, shares, boat, cash at bank and motor vehicle (if valued at over a certain amount).
- What assets can a bankrupt keep?
- A bankrupt can keep certain assets, which will generally include household furniture and belongings, personal items, superannuation, tools of trade and motor vehicles (valued at under a certain amount). The value of certain assets which a bankrupt can retain are available at the following link (page opens in new tab).
- Can a bankrupt keep a motor vehicle?
- A bankrupt can keep a motor vehicle, or vehicles, which are used as the bankrupt’s primary means of transport, up to a certain net value. The value of a motor vehicle that a bankrupt can keep is available at the following link (page opens in new tab).
- What debts are included in bankruptcy?
- Most debts are included in a person’s bankruptcy, including personal loans, credit card debts, debts owed to trade creditors and debts owed to the ATO. There are however, some debts that are not included in bankruptcy, such as Child Support debts and Court-imposed penalties and fines.
- How long does bankrupcy last?
- Bankruptcy will generally last for three years from the date a bankrupt files a Statement of Affairs (which is a form setting out a bankrupt’s assets, creditors and other information).
- Can the period of bankruptcy be extended?
- The period of a bankrupt’s bankruptcy can be extended so that the period of bankruptcy can be up to eight years. This will most commonly occur in circumstances where a bankrupt has failed to pay income contributions to his or her trustee, or the bankrupt has failed to provide information or documentation requested by the trustee.
- What are income contributions?
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A bankrupt is required to pay income contributions to his or her trustee if the bankrupt’s net (after tax) income exceeds a certain amount. The amount of after tax income which a bankrupt is able to earn prior to being liable to pay income contributions increases if a bankrupt has children or other people who are financially dependent on the bankrupt for support. The amount of income that a bankrupt is able to earn before being liable for more controbutions is available at the following link (page opens in new tab).
Generally a bankrupt will be able to pay income contributions by weekly, fortnightly or monthly instalments.
- Can a bankrupt travel overseas?
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A bankrupt is required to provide his or her passport to their bankruptcy trustee to be held for the period of their bankruptcy.
A bankrupt can only travel overseas with the consent of his or her bankruptcy trustee. A request by a bankrupt to travel overseas will generally be decided on a case by case basis.
- Can a bankrupt be a director or secretary of a company?
- A bankrupt can not be a director or secretary of a company during the period of their bankruptcy.
- Can a bankrupt trade a business?
- A bankrupt is able to trade a business, subject to certain exceptions, including:
- The business must be traded in the bankrupt’s name.
- The bankrupt must maintain suitable and accurate records for the business.
- A bankrupt is not entitled to incur credit over a certain statutory amount (available at the following link – page opens in new tab), without notifying the person who is providing credit that they are an undischarged bankrupt.
- Are there alternatives to bankruptcy?
- As an alternative to bankruptcy, a person, depending on his or her circumstances, may propose a Personal Insolvency Agreement or a Part IX Debt Agreement.
If you require further information regarding these alternatives to bankruptcy, you should contact our Brisbane or Gold Coast office and our experienced staff will be able to assist you.