The Limitations of Bankruptcy: How they could impact your life
The limitations of bankruptcy make it an incredibly difficult state to be in. With restrictions on your income, assets, job and lifestyle choices bankruptcy can be invasive and disrupt your life.
Debt Rescue exists to provide positive debt solutions to people experiencing financial distress. We provide a number of options for people at every stage of debt and where we can, we work our hardest to help people avoid having to declare bankruptcy. While bankruptcy is certainly not the end of the world, the limitations of bankruptcy make it the most disruptive debt solution available.
The limitations of Bankruptcy on your income
The limitations of bankruptcy on your income will prevent you from earning over a set limit for the life of the agreement. Once you have declared bankruptcy you cannot earn more than a set threshold outlined by the Australian Financial Security Authority. The threshold increases depending on the number of dependents you support. Any income you earn over the set threshold will be distributed to your creditors via the trustee assigned to your case.
Limitations on your assets during Bankruptcy
One of the limitations of bankruptcy is a set threshold on the value of assets you may own. While you will be allowed to keep most household items, valuable jewellery, antiques and fine art might be claimed and sold by your Trustee and the money distributed to your creditors. You may only keep your car and tools for work if their values comes under the threshold set by AFSA.
Owning a home during Bankruptcy
An undischarged bankrupt may not own a home. Any property or share in property you have will be sold by the trustee and the money will be distributed to your creditors. If your home loan was secured, the creditor who it was secured with may repossess your house. This is one of the most disruptive limitations of bankruptcy for home owners and their families.
Limitations of Bankruptcy on borrowing
You are allowed to apply for a loan or line of credit while you are bankrupt, however your success will be at the lenders discretion. You are not allowed to borrow more than $5,398 (as at March 2015). Many lenders view bankrupts as too high risk to lend any funds and serious penalties apply if you fail to disclose your situation.
Limitations on overseas travel
You cannot travel overseas while you are bankrupt without permission from the court.
What you can do to avoid bankruptcy and its limitations
If you think your debt is at the stage where you need to declare bankruptcy, call Debt Rescue today. We have a range of positive solutions which could help you avoid declaring bankruptcy and get back on track with your finances. If you do need to declare bankruptcy, our Case Managers will walk you through the process to ensure you understand the limitations of bankruptcy and the restrictions it involves.