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Differences Between Insolvency and Bankruptcy

How Are Bankruptcies Paid For in Australia?

Many individuals and companies end up in crippling debt that creates financial problems for them, which ultimately leads to a bankruptcy declaration. Bankruptcy can relieve you from most of your debt and give you an opportunity to start fresh but it has a lasting impact.
While bankruptcy can help you out of your financial situation, it doesn’t come free. You might be wondering how your debts are paid after you declare bankruptcy. Does the government pay or do you have to pay? There isn’t any fee to file for bankruptcy and there isn’t any maximum or minimum income or debt amount you must have to be eligible to apply for bankruptcy. However, you do have to make payments for certain things during your bankruptcy.

Let’s have a closer look.

How Are Bankruptcies Paid For in Australia?

The individual filing for bankruptcy is the one who basically pays for the bankruptcy. If you are declaring bankruptcy, you will have to pay the court filing payment that also helps in partially funding the court system and other bankruptcy case aspects.
In some cases, the trustee might get your fee waived depending on your income. If approved, the bankruptcy court handles the payment and ensures you receive the necessary bankruptcy services to complete the case.
However, the fee waivers are rare and are only granted when it is proved the individual can’t afford to make the payment even when the bankruptcy has been declared and they don’t have to pay the debts.

How Are Debts Paid In Bankruptcy?

When you declare yourself bankrupt, your debts are not typically paid in full. A trustee is appointed to you who evaluates your financial situation and your assets to pay some of your debt by:

Selling your assets
Making compulsory payments

The compulsory payments are the amount you have to pay every month if you are earning over a specified amount.
Your trustee can claim and sell most of your assets and use the proceeds from the sale to repay your creditors. The assets might include lottery winnings, tools, bank balances, vehicles, and real estate.
You have to declare all your assets when you apply for bankruptcy. If you fail to disclose any information to your trustee, you will end up facing penalties. The balance you owe is eliminated once you have been discharged from bankruptcy.
However, there are certain debts that are not covered in the bankruptcy that you would still have to repay, including student loans, taxes, court-ordered child support and alimony.

Assets That Can And Can’t Be Claimed During Bankruptcy

The debts in bankruptcy in Australia are mostly paid by selling off your assets. Here are the assets you own that your trustee can claim and sell off to pay off your debts during the bankruptcy and the assets they can’t sell:
Vehicles
You get to keep the vehicle you mostly use for transportation up to a certain amount. When the value of your vehicle exceeds the specified amount then your trustee can claim it to pay your debts.

House and Other Properties

Any house or property you own can be claimed by your trustee and sold to repay your creditors.

Cash or Bank Balance

Your trustee can claim your cash and the amount you have in your bank at the date you are declared bankrupt. However, you will still have a sufficient amount to cover your basic living expenses.

Money Received During Bankruptcy

The money you receive throughout your bankruptcy is not included in your typical income. This might include compensation payments, money gifts, inheritance money, and superannuation. All these payments are protected and the trustee can’t claim them to repay your creditors.
However, there are certain types of payments that are not protected, including lottery winnings or cash prizes. If you receive these payments during your bankruptcy, they can be used to pay your debts.
If you buy a vehicle, house or other asset using the protected money then this asset would also be protected. However, there are some exceptions.
For instance, if you purchase the asset by using 100% protected money, it can’t be claimed. But if you use only 20% of the protected money and 80% of unprotected money then your trustee can claim the asset and refund the 20% protected money. Therefore, it is essential to consult a bankruptcy expert to help you make an informed decision.

Tools of Trade

The tools you utilize to earn a living can’t be claimed by the trustee if they are valued below a specified amount. You have to determine the current market value of the tools, instead of how much you paid for them, to estimate their value.
If the value is below the specified amount, they are protected and you can keep them.

Household Belongings

Most of your household belongings that are of reasonable value can’t be claimed, for instance, appliances and furniture.

Debts You Have To Pay In Bankruptcy

Most of the unsecured debts, such as utility bills and credit card bills, are included in the bankruptcy. You don’t have to make payments for these once you have declared bankruptcy up till the date you became bankrupt.
However, you still have to pay the secured debt during bankruptcy. This can include car loans and mortgages. If you can’t make the payments for your secured debts, you will have to surrender the secured items.

Can You Pay Some Debts During Bankruptcy?

Even after declaring bankruptcy, you are allowed to voluntarily make some payments to pay off your debts. You will still be protected from creditors taking any legal action against you for debt that is included in the bankruptcy.
Keep in mind that creditors have the right to decide not to provide further services to you while you pay off your debts.

While bankruptcy is a challenging experience, it is an opportunity to fix your financial situation. However, you would still be required to continue making payments for secured debts that you owe that is not included in the bankruptcy.
It is important to understand the bankruptcy process in Australia to ensure you are making the right decision to declare bankruptcy. Since your debt is paid off by selling your assets and compulsory payments, you need to understand the options you have by consulting an experienced bankruptcy professional.

Using the right professional bankruptcy assistance, you would be able to make an informed decision and come out of your financial problems. Get in touch with us for a free consultation

 

Reviews

  • As a Trustee in Bankruptcy, Ross Thomson is often required to think outside the box. As well as creative thinking, Ross brings compassion to the table.

    For Ross, it’s important to see the people behind the financial problem –not just numbers.

    Ross recently helped a bankrupt client who lives in a retirement village with her seriously ill husband.

    The unit she & her husband live in is not owned by them, but subject to a 20-year lease.

    The money to be repaid by the management was due only at sale, when the client finally left the retirement village.

    Sale of the unit was likely to take several years &, if he did sell the couple’s unit, Ross realised he would be effectively evicting them from their home, without resources or family to help them.

    Ross decided to contact the retirement village management & put a proposal to them that they prepay some of the moneys they would otherwise pay the client.

    The village management considered the proposal & have agreed to prepay some of the moneys otherwise due.

    The client is relieved that she will not be evicted & can now concentrate on helping her husband through his health issues.

    The moneys paid represented about 75% of what would have been available to creditors if they waited two years.

    It is a win for the client and for the creditors.

    Melinda
  • I made an appointment with Andrew after finding him on google. I was nervous and apprehensive about what to expect but he made the process of bankruptcy extremely uncomplicated and stress free, allowing myself the opportunity to get the fresh start I was so desperate for. Thank you Andrew I could not recommend you enough.

    Kristy
  • Making the decision to go bankrupt was not easy however once I had spoken to Andrew i felt all my anxiety disappear. Andrew does not judge you and he has an innate ability to put you at ease. He took care of the whole process for me again reducing the stress involved with completing paperwork.
    Thank you very much.

    Hayley Eastough
  • I will definitely recommend Andrew Bell to anyone contemplating bankruptcy. Don't wait! Andrew is there to help. With his knowledge, he can advise you of the best path to take and assist with the mind boggling paperwork.

    Best of all, he is there for you through your entire bankruptcy period. Get your life back, it's not as bad as you think. Thank you Andrew for lifting the burden and allowing me to move on.

    Karilyn Mahon
  • I saw Andrew for 'advice only' on possible bankruptcy due to a divorce. Left an hour later with the paperwork all done and feeling like a new person!

    Andrew was extremely welcoming and made me feel so comfortable with my decision to proceed immediately.

    This was the best investment I have ever made and cannot speak highly enough of Andrew. He doesn't just give excellent service his follow up afterwards is amazing. Thankyou Andrew you made my 'new' life so easy to achieve!

    Vicki Johnston
  • Andrew was very helpful in helping me through the bankruptcy process, as a single mother left with a massive debt from my ex and our previous marriage. I was struggling to keep my head above water on a week to week basis.

    Andrew made me feel at ease immediately and helped me every step of the way, he happily and professionally answered any and all questions I had before, during and after the process. Thanks so much for your help Andrew!

    Aisha Edmonds
  • Would highly recommend Andrew to anyone having financial difficulties. Andrew made me feel very comfortable - he took care of everything and keep in regular contact with me throughout the whole process.

    Service was fantastic and he also keep in regular contact with me when everything had been finalised Thanks Andrew! can now get my life back on track.

    Cassandra Walsh
  • Very prompt service and excellent source of knowledge and information, I highly recommend Andrew's service for a quick turn around of circumstances.

    Eve Damjanovich
  • Andrew put my mind at ease in one easy appointment. Very satisfied with the outcome and service provided. Highly recommend Andrew.

    Tracey Douglas
  • Andrew was a steadying hand with his advice.Showing that things aren't as bad as first thought nor any obstacle insurmountable. If you have questions needing answers, Andrew is the person to ask. Thanks for your advice Andrew.

    Shane Thompson
  • Andrew was very knowledgeable, caring, helpful and compassionate when I went and saw him. He made me feel that I wasn’t the loser and failure that I thought I was being. Even down to the box of tissues on the table.. which I needed. Highly recommend to go see Andrew if your struggling. There is life after!

    Joanne Parker
  • Andrew and his team do an excellent job of helping their clients with bankruptcy advice and it is a pleasure to work with him.

    Gareth Lane
  • Don't hesitate contacting Andrew, I was stressed, struggled sleeping through debt. Andrew put me at ease. He listened to my situation and we decided on my next move. Andrew is professional and easy to talk too. I would recommend highly to anyone who wants help to give him a call. I appreciate your support Andrew. Regards Brett.

    Brett
  • Andrew has given me back my life!!! After living paycheck to paycheck, I didn’t know what to do. Until I made the big step and booked an appointment with Andrew. As soon as I left his office I felt a huge weight lifted!!!

    Deezy H
  • Andrew was prompt, organised, friendly and efficient with the processing of my documents and made everything very simple for me so I didn’t need to deal with the added pressure and stress. Thank you Andrew for allowing me to start afresh and getting it done within a matter of weeks.

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