Australian Bankruptcy Explained
More than likely, you, or someone you know, is contemplating
filing bankruptcy or has already done that. Bankruptcy is
a process that allows debtors who owe more money than they
can pay to either erase their debts or apply a payment plan
to pay a percentage (or all) of their debts over time. This
allows you to basically start over with financial planning
and credit standings.
Either way, it is very important to understand bankruptcy,
the laws involved, steps to filing and maintaining a good
credit limit afterwards to ensure continued success of financial
planning after starting over.
Early warning signs of possible bankruptcy would include:
- an inability to make monthly payments on all debt
- loss of some or all income that then prevents you from
maintaining monthly payments
- a disability that prevents you from working your current
level of income, or
- an unbalanced debt to income ratio.
In Australia, an individual must file a debtors petition,
a statement of affairs and an acknowledgment of having received
and read all pertinent paperwork with the Official Receiver.
A creditor can also file bankruptcy
against you in the same manner. This will at least ensure
that they receive funds from you for the debt incurred with
them.
You will need a trustee to oversee the bankruptcy. This
person can be someone you choose by filing a Consent to
Act with the Official Receiver or the Official Receiver
can appoint a trustee.
The duties of a trustee for bankruptcy purposes will include
handling creditors and contributions and accepting the assets
of the bankrupt person that are not protected under bankruptcy
laws. The trustee also has the power to gain back any assets
the bankrupt person has transferred to another for protection
of that asset.
Some assets are protected from bankruptcy under Australian
law. This will include most household goods, limited tools
of trade, a set limit of motor vehicles and superannuation.
Motor vehicle limits can change so make sure you refer to
current amounts on this exclusion.
You will also need to refer to current amounts when filing
for bankruptcy if you have a relatively high income, because
you will also be required to make regular contributions
back to the bankrupt estate. This will be paid back from
your income. A few other factors that affect this contribution
determination will depend on your income after any tax or
child support payments, and the number of dependents you
may have.
A bankruptcy period in Australia is usually 3 years but
can be prolonged for up to 5 years under certain circumstances.
Certain conditions also apply when in bankruptcy status.
Obtaining credit will be reduced, written approval is required
for travel overseas, you will be disqualified from managing
a corporation unless permission is received from the courts
and you may not hold certain job licenses such as real estate
or insurance.
The only requirements of filing bankruptcy in Australia
are that you be a legal resident of Australia, residing
in the country at the time of bankruptcy or you must own
a home or business in Australia.
Since bankruptcy can help you eliminate your debt, you
must also think carefully in deciding to eliminate that
debt by bankruptcy. It will change your life and you may
not want to give up certain things in order to reduce your
debt.
It is important that you consult with a company such as
www.BankruptcyOptions.com.au
specialists in bankruptcy laws for Australia in order to
make an informed decision of your options.
