Although bankruptcy can provide relief if you are unable to repay your debts, there are consequences which may affect you. Being aware of these consequences can help you decide if this is the best option for you.
Seek helpTo help understand the consequences of bankruptcy and how they may impact you, you can speak to a financial counsellor. Financial counsellors offer free, independent and confidential services that will help you consider your options for dealing with unmanageable debt. To speak with a free financial counsellor contact the National Debt Helpline on 1800 007 007. For more information on financial counsellors and other support services see Where to find help. Before you apply for bankruptcy, you can choose a registered trustee to administer your bankrupt estate. If you do not choose a registered trustee AFSA may seek the consent of a registered trustee to manage your bankruptcy. If a registered trustee does not provide their consent to act then your estate will initially be administered by the Official Trustee (AFSA). If you earn over a set amount, you may need to make compulsory payments[?] to your trustee. There may also be some restrictions on your employment and running a business. For more information see: Income and employment Most unsecured debts are covered in bankruptcy - this means you no longer have to repay these debts. There are some exceptions. For more information see: What happens to my debts You must request permission from your trustee to travel overseas. It's an offence to travel overseas without consent in writing. Your trustee may ask for further details to consider your request. The National Personal Insolvency Index is a searchable public register listing insolvency proceedings in Australia. For more information see: Who will know I’m bankrupt? If you apply for credit over a set amount, you must inform the credit provider of your bankruptcy. Credit reporting agencies[?] keep a record of your bankruptcy for:
For more information see: Who will know I'm bankrupt? You are able to keep:
Your trustee can sell other assets including your house and property. You must not dispose of any property belonging to the trustee. You must declare any assets you have when you apply for bankruptcy and any you receive during bankruptcy. For more information about which assets a trustee can claim see: Assets that can be taken or sold If you're involved in any legal action, you need to inform your trustee. If you have a pending court case, you should contact the court to confirm whether you must still attend. Contact the Commonwealth courts. Your bankruptcy period starts from the day we accept your bankruptcy application. If a creditor makes you bankrupt, the bankruptcy period starts from the date you file a statement of affairs that we accept. In some cases, your trustee can lodge an objection[?] to extend the bankruptcy for up to eight years. For more information see When will my bankruptcy end? If you enter bankruptcy, you will find that most debts are covered. This means that you no longer have to repay them. In some cases, your trustee may sell your assets or use compulsory payments[?] to help pay your debts. Read on to understand which debts bankruptcy covers and if you still need to pay certain types of debts.
An unsecured debtis not tied to specific property, like a house. Bankruptcy covers most unsecured debts, such as:
Bankruptcy releases most of these debts when it ends. In some cases,you may need to confirm with the creditor to see if bankruptcy covers the following:
Bankruptcy doesn't cover all debts, including:
This means you are still liable for these debts. You need to contact your creditors directly to discuss payment options. The debt comparison table shows which unsecured debts bankruptcy will cover. To discuss the types of debts you have and how they're treated in bankruptcy, you can speak with a free financial counsellor by contacting the National Debt Helpline on 1800 007 007. For more information on financial counsellors and other support services see Where to find help. A secured debt is tied to specific property, like a house. The creditor has the right to take possession of your property if you don’t make the payments. If this occurs you must assist with this recovery action. Some examples are:
You need to contact your secured creditors to discuss your intentions with the debt. If you’re unable to maintain the payments, you may be able to surrender the goods. Sometimes the creditor may sell the goods, however it still doesn't cover what you owe. We call this a shortfall. You can list the shortfall in your bankruptcy, then the creditor can no longer pursue you for this debt. A joint debt is a debt you share with another person. Normally if one person enters bankruptcy, the other person on the loan documents becomes 100% liable for the debt. If both people are bankrupt, they should include the debt in each bankruptcy. If you have a guarantor for a loan (e.g. your parent), normally the guarantor becomes 100% liable for the debt. If you are a sole trader you can list your debts in the bankruptcy. Debts you incur overseas are covered in your Australian bankruptcy. This means your creditors can't pursue for that debt in Australia. However, your overseas creditors can pursue you for the debt if you travel back to that country. This applies during and after your bankruptcy. You must include any overseas debts in your bankruptcy application. It's your responsibility to cancel any direct debits you have set up with your bank. It is best to speak to your bank directly if you want to stop a direct debit. For more information about how your debts are paid in bankruptcy see: How are my debts paid? |
What happens when a person declares bankruptcy?
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