Common Bankruptcy Questions

Financial difficulties can be overwhelming, and the prospect of bankruptcy often raises numerous questions. Understanding the process, its implications, and available support is crucial for making informed decisions. This guide will address some of the most common bankruptcy questions, providing clarity and guidance to help you navigate this challenging time.

What is Bankruptcy?

Bankruptcy is a legal process designed to assist individuals unable to repay their debts and governed by the Bankruptcy Act 1966, which outlines the rights and obligations of both debtors and creditors. Declaring bankruptcy can provide relief from unmanageable debt, but it also comes with certain responsibilities and consequences.

How Do I Declare Bankruptcy?

To declare bankruptcy, you need to submit a Bankruptcy Form to the Australian Financial Security Authority (AFSA). This form requires detailed information about your financial situation, including assets, liabilities, income, and expenses. Once your application is accepted, a trustee is appointed to manage your bankruptcy.

What Debts Are Covered by Bankruptcy?

Bankruptcy typically covers unsecured debts, such as:

• Credit card debts
• Personal loans
• Utility bills
• Other bills and debts
• Tax debts

However, certain debts are not discharged through bankruptcy, including:

• Court-imposed fines
• Child support payments
• HECS/HELP debts
• Debts incurred through fraud

It’s essential to understand which of your debts will be affected by bankruptcy.

Will I Lose My Assets?

When you declare bankruptcy, some of your assets may be sold to repay creditors. However, certain assets are protected, including:

• Essential household items
• Tools of trade up to a certain value
• A vehicle up to a specified value

Your trustee will assess your assets and determine which ones, if any, need to be sold.

How Will Bankruptcy Affect My Income?

During bankruptcy, you’re allowed to earn an income. However, if your earnings exceed a certain threshold, you may be required to contribute towards your debt repayments. The threshold varies based on your circumstances, such as the number of dependents you have. AFSA provides an income contributions calculator to help you determine if you’ll need to make payments.

How Long Does Bankruptcy Last?

In most cases, bankruptcy lasts for three years and one day from the date your application is accepted. However, this period can be extended if you fail to comply with your obligations during bankruptcy.

Can I Travel Overseas During Bankruptcy?

If you wish to travel overseas while bankrupt, you must obtain written permission from your trustee. Unauthorized travel can result in penalties and may extend your bankruptcy period.

How Will Bankruptcy Affect My Credit Rating?

Bankruptcy will be recorded on your credit file for five years from the date you become bankrupt or two years from when your bankruptcy ends, whichever is later. This can impact your ability to obtain credit in the future.

Seeking Professional Advice

Navigating bankruptcy can be complex, and seeking professional advice tailored to your situation is essential. The Insolvency Group offers complimentary consultations to help you understand your options and guide you through the process.

Common Questions Answered 

Understanding the intricacies of bankruptcy is crucial for making informed decisions during financial hardship. Familiarising yourself with the process and seeking professional guidance can help you navigate this challenging time more effectively. The Insolvency Group is here to support you every step of the way, providing the expertise and assistance you need to achieve financial freedom