Bankruptcy - Part 2

If you are in debt and are considering bankruptcy, you should know that bankruptcy is your last resort.

Bankruptcy has very serious consequences for the rest of your life. Do not take this step without speaking to Fox Symes.

There are alternatives.

Secured Creditors, Hire Purchase, Leases

Creditors who hold security over your assets, (such as mortgages, bills of sale) and creditors for hire purchase or lease agreements, can recover the property and sell it. They are then entitled to lodge a claim for any loss incurred.

If you wish to continue to use these assets you will need to negotiate with the secured creditors and make regular payments to these creditors. If the value of the asset exceeds the amount required to finalise the agreement, during your bankruptcy, the trustee may sell the asset.

What happens if someone has guaranteed some of my debts?

Bankruptcy does not affect the rights of a creditor to claim under a guarantee. The creditor is entitled to recover payment from the guarantor. Once payment has been made, the guarantor steps in the shoes of the creditor and is able to lodge a claim in your bankruptcy for the debt paid.

What happens if someone else also signed the loan agreement. Will they have to pay if I declare myself Bankrupt?

Generally, yes. They will still have a liability for the total amount outstanding on all debts incurred in joint names.

What about debts incurred just before Bankruptcy?

If you are already insolvent, that is you cannot pay your debts, you should not incur further credit because if you become bankrupt it may be an offence under the Bankruptcy Act, and you may be prosecuted.

What happens to a debt I forgot about at the time of becoming Bankrupt?

If you forgot about a debt and remember it later, you should contact your trustee as soon as possible so that it may be added to your list of creditors. Failure to disclose debts could extend your bankruptcy to 5 years.

What about debts incurred after Bankruptcy?

If you become bankrupt you will be responsible for any debts incurred by you after bankruptcy.

Can a creditor still contact me insisting on payment once I have become Bankrupt?

No. The Bankruptcy Act prevents creditors from recovering money from you. An exception is a secured creditor with whom you have made arrangements to retain secured property.

If other creditors attempt to recover money from you, you should advise them of your bankruptcy, and if they continue to insist you should notify your trustee. If physical harassment occurs, you should contact the police.

Can I continue to use my credit cards after Bankruptcy?

It is a matter for the issuing bank or finance company as to whether they are prepared to continue to extend credit to you. All creditors at the date of bankruptcy should be listed on your Statement of Affairs and they will be notified of your bankruptcy.

It is an offence for you to incur credit over $3,973 (indexed) without disclosing to the person you are dealing with that you are an un discharged bankrupt.

I've had a car accident and the owner of the other car is pressing me for the costs of repairs. Will the debt be covered in Bankruptcy?

The debt is covered by bankruptcy only if a court judgment has been obtained, or you have admitted responsibility for the debt in writing or started paying for repairs prior to bankruptcy.

Will I lose my assets?

Once bankrupt you can no longer sell or deal with most of your assets or items of value, the exceptions being property protected under the Bankruptcy Act, as shown below. Only the trustee (ITSA or a registered trustee), or a secured creditor is able to do so. The trustee may dispose of your property for the benefit of creditors.

Assets include anything of value belonging to you at the date of bankruptcy together with assets acquired by you before your discharge including lottery wins, prizes of value etc. Your interest in the family home, land, money in bank accounts, vehicles exceeding $5,800 (indexed) in value, stocks and shares, antiques and other personal property of saleable value are all included. Any interest you have or acquire during bankruptcy as a beneficiary of a deceased estate belongs to the trustee.

Certain assets are protected by the Bankruptcy Act which means they cannot be sold by your trustee to pay creditors. The property protected by the Bankruptcy Act includes necessary household furniture, personal effects, limited tools of trade ($2,900 indexed), life insurance and superannuation policies and the primary means of transport up to $5,800 (indexed) (eg. car or motor bike).

Will I lose my house?

The trustee has to deal with any equity or interest you have in a property, for the benefit of your creditors. This may mean that the property has to be sold. If the property is jointly owned the trustee may consider selling his interest in your property to a non-bankrupt joint owner. Alternatively the joint owner provided they are not bankrupt may make an offer to purchase the trustees interest in the property.

A house property that is subject to a Defence Service Homes mortgage cannot be sold by the trustee without the approval of the Secretary of the Department of Veterans' Affairs.

A secured creditor could sell your property should you be unable to meet the mortgage repayments. Any shortfall will be a debt in your bankruptcy. If a surplus exists following sale, these monies will be paid to your trustee.

What if I have a car?

Once you become bankrupt, a vehicle which is used primarily as a means of transport (eg. car or motor bike), where your interest in the vehicle is less than $5,800 (indexed), is protected and can be retained by you. Where the interest in vehicle is valued at more than $5,800 (indexed) the trustee is required to sell, and give back to you the first $5,800 (indexed) of the proceeds of sale, to enable you to purchase a cheaper vehicle. If the vehicle is jointly owned by two bankrupts the relevant value is $11,600 (indexed).

More - Page 3 on Bankruptcy

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If you are employed and have debts greater than $10,000 please call us on 1300 361 204 or fill in this form. We have live Debt Consultants available to help you now.

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