Applying for Bankruptcy
Bankruptcy is a legal process that releases you from your debts, allowing you to make a fresh start. When you decide to go bankrupt, a registered trustee will be appointed to your estate. Your trustee will then proceed to sell your assets to help pay your debts. Your trustee will also collect compulsory payments from your income if it exceeds a set amount.
When can claiming bankruptcy help?
Bankruptcy is certainly not the right option for everyone. But for the right people in the right circumstances, it can be a saving grace.
It lets you start again and gives you a clean slate on which to rebuild your finances.
Put an end to those harassing calls and emails coming from your creditors and debt collectors.
By eliminating your unsecured debts, affording things like groceries and petrol becomes easy.
It eliminates your debts, relieving your stress and allowing you to breathe easy again.
While bankruptcy can help, it’s not always your only option. By speaking to a Debt Rescue Case Manager, we can help you work out if a debt agreement or bankruptcy is best in your situation.
Eligibility in Applying for Bankruptcy
You are eligible for bankruptcy if you:
- Can’t afford to pay your debts when they’re due
- Are an Australian citizen (or have a residential or business connection to Australia).
There’s no maximum or minimum amount of debt. However, as the regulations can be quite restrictive, it should be left as a last resort. If your debts are less than $10,000, you may want to look at different options.
If you’ve previously been bankrupt, you’re able to go bankrupt again. You must be able to prove you are unable to afford your debts.
Success Story: Jolene's Bankruptcy
Jolene is a 65-year-old retiree renting a little beach shack in Ballina, NSW. Her family is close by in Byron Bay and she drives the car she owns to visit them on weekends.
Jolene struggled with some health issues that required her to take out several loans and credit cards, to the value of $35,000. Jolene was struggling to make repayments on these debts and still have enough left of her pension to afford everyday living expenses like rent, groceries and ongoing medical costs.
Jolene called Debt Rescue because she was being harassed by her creditors and didn’t know what she could do. She didn’t want to trouble her family for financial help and was completely overwhelmed by her situation. Debt Rescue explained to Jolene that bankruptcy was her best option – as it would immediately clear the debt so her pension could go towards her living expenses. Her car fell within the allowable indexed amount so she was able to keep it and her pension and living arrangements weren’t affected by this decision either.
We were able to provide a list of documents and information Jolene needed for her application and proceeded to complete the necessary documents on her behalf. After a thorough compliance check, the documents were submitted and accepted. Jolene was now able to enjoy her good health and retirement with her family without the stress of bad debt looming over her head.
How Debt Rescue Can Help You Declare Bankruptcy
Declaring bankruptcy can be overwhelming. Let Debt Rescue take the stress out of your financial situation. Our team of professionals have assisted thousands of Australians through the bankruptcy process.
We’ll help you gather the essential information, complete the forms and put them through the mandatory checks before submitting them. We can even provide a Registered Trustee who is fully aware of your situation.
Check out your local bankruptcy service for more information.
The Steps in Applying for Bankruptcy
You’ll need to provide documents to your Case Manager so they can complete the application on your behalf.
Debt Rescue’s dedicated Compliance Manager will review your application and submit it to the Australian Financial Security Authority.
Once your application is accepted, you’ll receive a number in the mail. You have officially been relieved of your debt.
Frequently Asked Questions
While bankruptcy restrictions can impact your lifestyle, for the most part, it offers you a stress-free way to get out of debt. To help put your mind at ease, we’ve answered some frequently asked questions about declaring bankruptcy.
How long does bankruptcy last?
It typically lasts for 3 years and 1 day. It can be extended to up to 8 years under certain circumstances, such as not complying with requests made by your Registered Bankruptcy Trustee.
There is legislation currently in parliament that proposes changes to Australia’s corporate insolvency laws. This legislation will shorten the bankruptcy period to 1 year. Should the legislation be passed, it will also apply to all existing bankruptcies.
What debts can be included in bankruptcy?
All unsecured debts including credit card debts, personal loans, store cards and old utility bills. You must continue paying some debts during your bankruptcy. These are:
- Penalties and fines imposed by the court
- Unliquidated damages from accidents
- HECS and HELP debts
Bankruptcy cannot include secured debts, such as a mortgage or vehicle loans. However, if you fail to make the repayments on these debts, the creditors are within their rights to repossess the security (home or car) and sell it to recover their money. If there is any equity in the assets supporting the secured debt, those assets may be sold by your Trustee with the proceeds going to your creditors.
How long is bankruptcy noted on my credit file?
It will remain on your credit file for the entire period (generally 3 years, but may extend up to 8 years). Once over, it will still remain on your credit file as a discharged bankruptcy for a further 2 years.
When you go bankrupt, your name will be put on the National Personal Insolvency Index (NPII). This is a register of all insolvency activity, which anyone can access for a fee. Banks will access the NPII to check for previous insolvencies. Your name is on the NPII for life.
Can I keep my house in bankruptcy?
Bankrupts generally can’t own property. However, depending on your circumstances, there may be a way you can keep your family home for the duration of your bankruptcy.
To see if this might be a possible option for you, call us now on 1800 00 3328. We will learn about your situation and make recommendations for you.
Will I lose all my assets in bankruptcy?
You’re able to keep household goods such as beds, clothes, whitegoods, etc. You may also keep certain tools of the trade and a vehicle up to a set amount.
How much can a bankrupt Earn?
Bankrupts are required to make compulsory payments if their net income exceeds a set amount. Your Trustee will assess your income at the end of each financial year. For every dollar you earn over the set threshold, your Trustee will ask for 50 cents. The excess money will then be given to your creditors.
Will bankruptcy affect my employment?
Bankruptcy doesn’t stop you from working. However, declaring bankruptcy may make it difficult for you to hold a particular licence, which may prevent you from being a member of that professional body or trade organisation. For instance, a bankrupt cannot hold a Real Estate license and, therefore, can’t operate as a real estate agent while they are bankrupt. There may also be limitations to operating as a sole trader and you cannot be a director of a company.
If you need a licence for your job, contact Debt Rescue to discuss your situation. Our Case Managers will be able to give you personalised information and advice.
Can I travel overseas while bankrupt?
Yes, you can travel overseas while you are bankrupt. Before you travel, you must obtain written approval from your Trustee.
What happens after your bankruptcy is finished?
Once your bankruptcy is over, your credit file will show you are a discharged bankrupt and the restrictions placed on your lifestyle will be lifted. After your bankruptcy, you may still find it difficult to secure finance through traditional lenders, however there are many financial institutions outside of the traditional sphere who are happy to lend to Australians with a bad credit history. Positive Solutions Finance can help you with this.
Being a discharged bankrupt allows you the opportunity to slowly rebuild your credit score and truly put your financial issues behind you. To rebuild your credit rating and gain trust with lenders, you can:
- Pay all your bills on time
- Pay more than the minimum
- Keep up to date with payments
- Avoid making excess credit enquiries
- Avoid credit cards at all costs and instead develop a healthy savings account
Need Help Declaring Bankruptcy?
Let Debt Rescue assess your debt situation and determine the best course of action for you. We can relieve your debts, so you can breathe easy again.
For insightful information on Bankruptcy and how it can clear your debts, discover our extensive archive of Bankruptcy articles.