Can I Lose My Superannuation in Bankruptcy?

What Does the Law Say About Your Superannuation When You Are Declared Bankrupt? This is a valid concern as it doesn’t just affect you now. It also impacts the people around you if you cannot care for yourself later in life. Is Superannuation protected from creditors? Fortunately, the Australian Bankruptcy Act does classify superannuation as a protected asset. In most situations, superannuation is protected from creditors and will not be considered when all assets are liquidated and distributed among your creditors.

There Are Exceptions

These exceptions regarding Superannuation in Bankruptcy to prevent people from moving assets around in an unethical manner, specifically paying money into superannuation to hide it for protection, only to move it out again after the bankruptcy process has concluded.

Using the Federal Government Super Fund database to search for your investments, we can advise you on the best way to proceed with bankruptcy and superannuation.

Despite the protected status of your superannuation, be mindful that there are exceptions. It can lose its protection status if:

• Your superannuation fund is not held in a regulated fund
• It is not held in an approved deposit fund
• If it is a government / public sector scheme, those rules and protections will be excluded from the Bankruptcy Act’s definitions.
• Suppose you withdrew any funds before you entered the Bankruptcy process. For example, if you used a lump sum to pay off your house, the house itself becomes an asset. Pensions are different and do not enjoy the same level of protection as superannuation.
• Pensions are seen as an income which changes the definition of its application in a Bankruptcy process. There is a scale to determine how much pension income can be considered an asset during a Bankruptcy process.

What Is the Best Course of Action?

While we can guide you, we strongly advise you to consult with one or more trusted advisors or your financial advisor about your financial situation before taking action. There are many statutes surrounding superannuation that can impact the bankruptcy process. Understanding the laws about bankruptcy and superannuation and how you are entitled to certain protections beforehand is essential.

Help with Superannuation in Bankruptcy?

“Superannuation in the Bankruptcy process is an important consideration. Nobody wants to be financially struggling when they retire, but you can lose those funds if the process isn’t handled correctly. We understand and empathise with how much stress and upheaval are caused when making these important life decisions. We’ll work with you to find the best solution for all your assets within the framework of the law and try our best to ensure your future security.”