There are many restrictions during bankruptcy you must comply with to meet the terms of the arrangement. These restrictions can have a very limiting and stressful impact on the way you live your life. Before you enter into bankruptcy, familiarise yourself with the restrictions during bankruptcy and decide whether it is the best form of debt relief for you.
Some of the main restrictions during bankruptcy include the following:
- When borrowing money you must disclose you are an undischarged bankrupt when seeking finance over a certain limit
- You cannot be a director of a company or be involved with its management without permission of the Court
- You may be able to continue to operate a business whilst bankrupt, however if you trade under an assumed name (i.e. partnership or firm name) you must disclose that you are bankrupt to everyone that you deal with
- You may not be able to remain employed in particular trade or professions
- You may be prevented from continuing any court action that you have started
- You cannot travel overseas without first seeking permission from a judge
Asset Restrictions During Bankruptcy
Assets are anything of value you own when you become bankrupt plus anything you buy or receive before the end of your bankruptcy. When you enter Bankruptcy, your assets are taken by the Trustee assigned to your case. The Trustee will sell them and distribute the funds to your creditors. These are some asset restrictions during bankruptcy.
Assets you can keep:
- Most ordinary household or personal items
- Tools used to earn an income up to a set limit
- Vehicles, cars & motorbikes where total value minus sum owing under finance is less than a set limit
- Most funds held in registered superannuation fund
- Compensation for a personal injury
- Asset held by you in trust for another person (i.e. Child’s bank account)
- Awards of a sporting, cultural, military or academic nature
Assets your Trustee may sell to benefit your creditors:
- Houses, apartments, land, farm & business premises including leases
- Motor vehicle other than exempt ones
- Shares & other investments including shares held in your employers business
- Tax refunds for income earned before you became bankrupt
- Proceeds of a deceased estate where person dies before or during your bankruptcy
- Lottery winnings and competition prizes
Assets you own with another person can also be sold by your Trustee. If the co-owner is not bankrupt the Trustee may agree to sell your share to them at market value. Secured creditors cannot take back an asset just because you are bankrupt, however if you fall behind in payments they can take and sell it whether you are bankrupt or not.
Employment Restrictions During Bankruptcy
The Bankruptcy Act does not impose restrictions during bankruptcy on employment. However certain industry associations or licensing authorities may impose restrictions should a member or licensee become bankrupt. You should check with your relevant licensing authority or professional organisation to to see if bankruptcy will have an impact on your employment before you decide to apply. If you aren’t sure, double check with your licensing body.
Income Restrictions During Bankruptcy
Income restrictions during bankruptcy apply if your after-tax income exceeds a certain amount. If so you will have to pay contributions from your income to your Trustee. If you are a low-income earner you will not have to pay contributions, however you may make voluntary payments to your Trustee. At the start of your bankruptcy your Trustee will calculate if you are required to pay any income contributions during the first year of bankruptcy, this process will be repeated at the start of each subsequent year.
Obligations and restrictions during bankruptcy
There are a number of other obligations and restrictions during bankruptcy you should consider before you decide to declare bankruptcy. A comprehensive list can be found on the AFSA website. If you would like to get professional advice from a caring and compassionate Aussie about your financial situation, call Debt Rescue.