Bankruptcy

Frequently Asked Questions in bankruptcy

The following frequently asked questions (FAQs) section covers a variety of impacts of becoming bankrupt.

If you‘re thinking about filing for bankruptcy, we recommend that you review our entire FAQ section.

Bankruptcy basics

How do I become bankrupt?

There are two ways to become bankrupt. You can either become bankrupt voluntarily, or a creditor to whom you own money can apply to have you declared bankrupt.

If you’ve considered the alternatives available to you, and have decided that voluntary bankruptcy is your best option, you’ll need to complete two the Debtor’s Petition and the Statement of Affairs. These forms summarise your income, assets, liabilities, business details and other dealings you’ve had in the previous 5 years.

You can either lodge the forms through AFSA yourself, OR a registered trustee (like us) might lodge them for you.

There are lots of companies looking to charge you fees for lodging bankruptcy paperwork, but most of them won’t tell you that it’s possible to file for free!  If you’ve spoken with such a company already, we recommend that you read our blog post on FREE BANKRUPTCY.

If you’re looking to go bankrupt for free, make an online enquiry or call us on 1300 369 168.

Once the paperwork has been lodged, the forms are typically processed within 1-5 business days, after which, you become bankrupt. From there, you’ll receive a letter confirming your bankruptcy, as well as an outline of your duties and obligations while bankrupt.

It’s important that you’re completely honest about your circumstances when completing your Statement of Affairs. There are severe penalties, including imprisonment, if you fail to disclose, hide or unlawfully dispose of property or any items of value.

Can a creditor make me bankrupt?

Yes. If you have a debt of $5,000 or more, a creditor can make you bankrupt. The creditor can apply to the Federal Court or the Federal Magistrate’s Court to have you declared bankrupt by sequestration order.

How long will it take to process my bankruptcy forms?

The Debtors Petition and Statement of Affairs forms are typically processed within 1 – 5 business days, but there can be delays if your paperwork has been incorrectly completed or if information is missing.

Who would handle my bankruptcy?

Every bankrupt estate requires a Trustee to handle the administration.

There are two types of Trustees:

If a creditor has taken action to bankrupt you, the creditor may choose a Trustee. They can also request a change in Trustee during the bankruptcy.

When you become bankrupt voluntarily, you may want to choose a Registered Trustee. Andrew Aravanis, Ronil Roy and Alexander Clark are the Registered Trustees at Aravanis.

If your chosen trustee consents to administer your bankruptcy, they will lodge a Consent to Act form along with your bankruptcy paperwork. Once processed, they then become your appointed bankruptcy trustee.

Generally speaking, a registered trustee will only consent to act for you if they believe that you need to pay some contributions from your income or if you have assets that aren’t protected. If your bankrupt estate is unlikely to contain either, it may be difficult to find a registered trustee to consent to act as there is no way for them to recover their costs.

If the Official Trustee is appointed as the Trustee of your bankruptcy, administrative officers at AFSA will handle the matter.

It’s important to remember that regardless of the Trustee appointed, the Trustee’s fee is typically paid out of those funds recovered in the bankruptcy administration (unless you’re seeking an annulment of the bankruptcy).

Is my bankruptcy advertised?

Generally no. A trustee can advertise a bankruptcy if they feel it’s necessary, but we find that this rarely occurs in reality.

How can I confirm if someone is bankrupt?

The National Personal Insolvency Index (NPII) is a public and permanent register of personal insolvency proceedings in Australia. The NPII provides information regarding the insolvency status of individuals, including:

  • The name, date of birth (if known), residential address and occupation as disclosed on the documents accepted by the Official Receiver
  • Previous names and aliases (if known)
  • The type of proceeding, the date it started and the administration number
  • The name and contact details of the trustee or administrator of the proceeding
  • The current status of the person and/or the proceeding (for example, whether a person is discharged from bankruptcy or whether there is a creditor’s petition for a person’s bankruptcy in progress).

Anyone can search for a name on the NPII for a fee.

Will I have to appear in Court?

Becoming bankrupt voluntarily does not require you to make any court appearances.

Your trustee will complete investigations during the period of your bankruptcy, and depending on your circumstances, you may be asked to attend an examination before the Official Receiver or a Court if you have failed to adequately meet your obligations in the bankruptcy administration. In our experience, this doesn’t happen for the majority of people.

How long would I be bankrupt?

The bankruptcy period is 3 years, and 1 day from the date of your Statement of Affairs being processed by AFSA. This period may be extended by an objection entered by the trustee.

Objections may extend bankruptcy to 5 years or 8 years.

Extending bankruptcy to 5 years from the date of filing your Statement of Affairs

An application to extend bankruptcy to 5 years from the date of filing a Statement of Affairs can occur if you’re bankrupt and:

  • Made a void transfer against the trustee because of Section 120/122 of the Bankruptcy Act 1966 (undervalued transactions and preference payments)
  • Continued to manage a corporation
  • Engaged in misleading conduct
  • Fail to disclose a liability that existed at the date of bankruptcy to the trustee
  • Fail to notify a change of address or daytime telephone number
  • Fail to advise the trustee of any material change to the information disclosed on their Statement of Affairs
  • Fail to attend a creditors’ meeting without written approval from the trustee
  • Fail to attend an interview or examination, and/or
  • Fail to disclose any beneficial interest in any property.

Extending bankruptcy to 5 years from the date of returning to Australia

An application to extend bankruptcy to 5 years from the date of returning to Australia can occur if you’re bankrupt and leave Australia without the written permission of your trustee and do not return.

Extending bankruptcy to 8 years from the date of filing your Statement of Affairs

An application to extend bankruptcy to 8 years from the date of filing a Statement of Affairs can be made if you’re bankrupt and:

  • Made a void transfer against the trustee because of Sections 121, 128B and 128C of the Bankruptcy Act 1966 (transfers to defeat creditors)
  • Fail to provide details of property and income when requested
  • After the date of bankruptcy, you deliberately provide false or misleading information to the trustee
  • Fail to disclose details of income or expected income
  • Fail to pay contributions as assessed
  • Fail to adequately explain how money was spent or how assets were disposed of
  • Fail to disclose a liability that existed at the date of bankruptcy to the trustee
  • Fail or refuses to sign a document when required, or
  • Intentionally fail to disclose a beneficial interest in a property to the trustee.

Extending bankruptcy to 8 years from the date of returning to Australia

An application to extend bankruptcy to 8 years from the date of returning to Australia can occur if you’re bankrupt and fail to come back to Australia when your trustee requests you to do so.

Debts & Creditors

When are my creditors notified of the bankruptcy?

The trustee notifies all creditors (as specified in the Statement of Affairs) in writing as soon as possible. They are informed of your assets and liabilities.

Unsecured creditors should stop contacting you once they are notified of your bankruptcy. Remember, though, that bankruptcy doesn’t affect the right of a secured creditor to repossess and sell their secured asset if you default on payments.

What debts are covered in bankruptcy?

You must disclose all your debts in your Statement of Affairs. Some debts are not provable in bankruptcy, such as child support penalties or fines and HECS-HELP debts. You will need to keep paying these debts.

When you’re discharged from bankruptcy, you‘ll be released from your provable debts. However, there are certain debts that you’re not released from such as child support and in some cases, debts incurred by fraud.

Other debts from which you will not be released include unliquidated damages, such as those resulting from a motor vehicle accident.

Unsecured creditors: An unsecured creditor doesn’t have a hold over the possessions, assets or property purchased with the credit they provided to you. An example of this can be credit card debts.

These creditors don’t have the right to repossess goods purchased. Any legal action being taken by an unsecured creditor (such as a summons, garnishee, or recovery action by a sheriff or bailiff) must stop. Once bankrupt, you don’t have to continue paying your unsecured creditors.

You must remember to cancel any direct debit arrangements made by you for these debts when filing for bankruptcy.

Secured creditors: A secured debt is where a creditor has a mortgage, lien or charge over an asset until the debt is paid for.

If you default on payments, bankruptcy does not affect the right of a secured creditor to repossess and sell the asset to reduce your debt to them. Any shortfall from the sale of the asset will be a provable unsecured debt and will be covered in your bankruptcy.

What happens to all my debts and creditors?

Where the trustee can generate funds above the cost of the administration from the sale of your assets and income paid under the Bankruptcy Act, they will distribute those funds to your creditors. Such payment is made in accordance with the Bankruptcy Act and is called a dividend.

If there are insufficient funds, your creditors will not be paid.

Can I include my overseas debts in my bankruptcy?

You’re obligated to list any and all foreign debt, and all Australian debt, on your Statement of Affairs. The international creditors may participate as provable creditors in the bankruptcy as if they were Australian creditors.

However, international creditors may pursue you in their relevant country under the applicable foreign laws.

Do I need to cancel creditor direct debits from my bank account(s)?

Yes, you’ll need to cancel any direct debit authorities with your financial institution or bank unless you choose to keep paying that particular creditor.

Becoming bankrupt will not automatically cancel direct debits you have previously authorised from your bank accounts.

Will my bankruptcy affect my partner?

Where your partner is jointly liable for a debt, they will remain responsible for the entire amount and must continue with the normal repayments as per the contractual terms.

If you and your partner own assets jointly, your share of the asset may vest.

If this sounds like your situation, you should call and speak with one of our expert consultants on 1300 369 168 or make an online enquiry to receive obligation-free advice.

Assets

What assets can I keep?

Assets are anything of value that you own when you become bankrupt plus anything you buy or receive before the end of your bankruptcy.

Some assets are protected by the Bankruptcy Act. These items include general household items, furniture and general personal effects. The Act also protects some life insurance and superannuation policies.

Motor vehicles used mainly for transport and tools used to earn an income are also protected up to a set limit.

This is illustrated in detail at How Will Bankruptcy Affect Me?

Will I lose my assets?

When you become bankrupt, you can no longer sell or deal with any of your assets that are not protected under the Bankruptcy Act.

How Will Bankruptcy Affect Me? outlines assets that you may retain in bankruptcy and some of the options available for assets that do vest.

One thing that’s important to realise is that any assets you acquire during your bankruptcy will also vest in the trustee. This includes lottery, prize winnings and inheritances. If you receive an amount that significantly exceeds your unsecured debt level, you will likely be in a position to annul your bankruptcy.

Will I lose my house?

Real property is an asset. Property (or even a share of property) held by you will vest with your trustee at the date of bankruptcy.

Your 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 on the open market, but there can also be other options.

The trustee may consider selling your interest in the property to a non-bankrupt person. As an example, such a person might be the co-owner of your property. To see this illustrated in action, refer to How Will Bankruptcy Affect Me? 

Own property and considering bankruptcy? Contact us now on 1300 369 168 or make an online enquiry for an obligation-free chat to see if we can help you.

Also be aware that a secured creditor, such as your bank, could sell your property if you’re unable to meet the mortgage repayments. If they are unable to sell the property for the amount equal to your mortgage, the shortfall will be a debt in your bankruptcy. If they do sell the property for a higher amount, the extra money will be paid to your trustee.

Will the trustee come to my house?

Generally not. While there are some rare occasions where the trustee may require access to your home, you will typically receive notification before they visit. Working with your trustee is important. If you don’t cooperate, they can still obtain access (only under these circumstances it will be without notification) by serving you with a notice.

Can I keep my car?

The Bankruptcy Act protects vehicles used mainly for transport (such as a car or motorbike) once you become bankrupt. These vehicles can be retained by you where your interest in the vehicle is less than the threshold amount.

If you own a vehicle valued at more than the threshold amount, your trustee may sell the vehicle and provide you with the value of the threshold amount. The balance is to be retained for the bankrupt estate.

Alternatively, a non-bankrupt third party could purchase the value of the vehicle above the threshold from your trustee. Doing so would allow you to hang onto the car.

Own a car above the threshold and considering bankruptcy? Contact us now on 1300 369 168 or make an online enquiry for an obligation-free chat to see if we can help you.

If you and your partner jointly own only one vehicle and you both become bankrupt, the value of the protected threshold amount applicable to that vehicle will double (ie if the threshold is currently $7,900 and you jointly own one vehicle with your partner valued at $15,000, then the vehicle will be protected in bankruptcy as your share of the vehicle would equal the threshold).

Let’s look at an example.

Example: jointly owned car

Jenny and Mike jointly own a vehicle. They purchased it 5 years ago using a joint car loan, which they both paid through a joint account. Both of their incomes were deposited into the joint account.

The car has a market value of around $14,000, and both Jenny and Mike have filed for bankruptcy.

Here’s how the vehicle is assessed under the bankruptcy:

Total value of the vehicle:                  $14,000

Mikes’ interest:                                     $7,000

Jenny’s interest:                                   $7,000

The relevant threshold is $7,900 per bankrupt person, which means that Jenny and Mike’s car would need to be worth more than double this amount to vest in the bankrupt estate. Because their car is only worth $14,000, it’ll be protected in bankruptcy.

Am I allowed to save money during bankruptcy?

Your trustee may be entitled to claim the balance of your bank account(s) on the date of your bankruptcy. It’s a one-time deal at the beginning of your administration and there may be a temporary freeze on your bank account(s) on or just after the date of bankruptcy.

Most trustees recognise that you need to live and will let you keep up to a certain amount so that you can pay your bills and cover your day to day living expenses. The income you receive after the date of bankruptcy will be assessed under the Bankruptcy Act, and if you earn over a certain amount, you may need to contribute some of it towards the bankrupt estate, but then the rest will be yours to keep.

However, it’s important to realise that if you purchase assets that are not protected assets during your bankruptcy with those funds, the assets will vest in your trustee.

If I have assets that have not been sold by the trustee at the date of my discharge, what happens to them?

Despite the bankruptcy being discharged, the unsold assets will continue to vest in your trustee.

For example, if you own a house that didn’t have enough equity to warrant the trustee selling it at the beginning of the bankruptcy, and/or the trustees’ interest hadn’t been purchased by a non-bankrupt third party, then the house will continue to vest in your trustee for another 6 years from the date of your discharge.

After this 6 years has elapsed, the trustee may continue to apply to have this period extended, resulting in them owning your interest indefinitely or until such time where it becomes commercially viable for the trustee to sell it.

Can I access my superannuation to pay my creditors and avoid bankruptcy?

To determine whether you’re eligible to access superannuation, please contact your superannuation fund.

If you’re not eligible, you may also consider an early release of superannuation benefits by contacting the Australia Prudential Regulation Authority (APRA) on 1300 131 060.

Generally, APRA will only authorise the early release of superannuation on specific compassionate grounds such as funeral assistance, medical care, medical transport, care for a terminal medical condition, and for mortgage arrears that are about to lead to the repossession of your house. Not on the grounds of insolvency or avoiding bankruptcy.

Can I access my superannuation if I am bankrupt?

If you’re otherwise eligible, yes. Superannuation payouts received after the date of your bankruptcy are protected under the Bankruptcy Act.

However, any superannuation funds that you have accessed before the date of your bankruptcy are not protected.

What happens with my tax refunds?

A tax refund as a result of income you earned before the date of your bankruptcy is regarded as an asset. This means that it vests in your bankrupt estate and will be claimed by the trustee to pay your creditors.

This is irrespective of when you receive the refund. Also be aware that any tax refunds you receive as a result of income earned during your bankruptcy will be treated as assessable income for contribution assessment purposes.

Now, if the Australian Tax Office (ATO) is one of your creditors, they may hold onto any refund you’re entitled to during the period of your bankruptcy. This enables them to offset your pre-bankruptcy tax debt and/or any Family Assistance or Child Support debts that you may have incurred.

After you’re discharged from bankruptcy, any debt still outstanding to the ATO that formed part of the bankruptcy cannot be recovered by the tax office.

Do I still need to lodge a Tax Returns when bankrupt?

Yes.

Regardless of bankruptcy, you’re still responsible for lodging your Income Tax Return.

If you work with an accountant or another advisor to prepare your tax returns, you’re not required to notify them that you’re bankrupt (although you may choose to).

I will be entitled to a compensation payout – how will this be affected?

There are various types of compensation claims that need to be considered individually.

Compensation specifically relating to a personal injury are generally protected in bankruptcy, regardless of when you receive it, together with the assets acquired from such proceeds.

Example: Receiving compensation during bankruptcy

Robert became injured at work some years ago and is pursuing his former employer for compensation relating directly to the injuries he sustained. Recently, Robert filed for bankruptcy.

Robert expects to be awarded damages and to receive a compensation payment at some point in the future. Because the compensation relates to personal injury sustained by Robert, the payment he receives in the future will be protected from his bankrupt estate.

What happens if I have transferred my assets to other people prior to bankruptcy?

Your trustee has the power to void transactions made before your bankruptcy. They will investigate the transfer and may recover the asset if the exchange value was less than the market value.

If a transfer in a defined period before bankruptcy resulted in giving one creditor a preference over other creditors, then that particular transfer may also be a voidable transaction.

Transfers of property, or a contribution to a superannuation fund, can also be voidable regardless of whether the transfer was made before bankruptcy if that transfer or contribution was made to defeat the interests of your creditors.

It’s vital to note that disposing of any property before bankruptcy with the intent to defeat your creditors may constitute an offence under the Bankruptcy Act.

What happens if I win the lottery during my bankruptcy?

Lottery winnings aren’t protected in bankruptcy, so they’ll vest in your trustee.

Should you win enough to annul your bankruptcy, your unsecured creditors and the costs of the administration will be paid, but you’ll get to keep any surplus funds.

If there aren’t enough funds to annul your bankruptcy, the winnings will be paid to the bankrupt estate and your administration will continue.

What happens if I become the beneficiary of a deceased estate, or I inherit money or other assets during my bankruptcy?

Your interest in any deceased estates or inheritance received during the bankruptcy period aren’t protected, so they’ll vest in your trustee.

Should you inherit enough to annul your bankruptcy, it will pay your unsecured creditors and the costs of the administration, and you’ll get to keep any surplus funds.

If there aren’t enough funds to annul your bankruptcy, the asset will be realised and paid into the bankrupt estate and your administration will continue.

Income & Employment

How does bankruptcy affect my employment?

The Bankruptcy Act doesn’t specifically enforce any restrictions on your occupation or employment.

However, there may be certain limitations imposed by the professional associations or licensing authorities of particular trades or professions. You should contact your professional association or licensing authority to confirm whether there is any effect on your membership or ability to practice a particular trade during bankruptcy.

The AFSA website provides a comprehensive list of trades and professions where restrictions may apply. Remember that this doesn’t mean you can’t continue to work in your profession; it means that there may be restrictions or limitations, and that you should seek advice from the relevant licensing or professional body.

We recommend that you also review your employment contract (as well as any other regulations which govern your employment) to see if bankruptcy will affect your job. If you do find clauses in your contract regarding bankruptcy, being insolvent under administration, or committing an act of bankruptcy, we would further recommend that you have a confidential discussion with your immediate manager or HR department to determine whether or not bankruptcy will prevent you from continuing in your current role.

Many of our clients have found clauses within their employment contracts but, after discussing their situation with their employer, they were still able to file for bankruptcy and remain in their current roles. At the end of the day, it comes down to your particular circumstances, and it might require some independent research on your part before you file for bankruptcy.

Example – bankruptcy and employment

An example of a professional who may be impacted by bankruptcy is a solicitor. The Law Society of NSW issues ‘Practising Certificates’, and a bankruptcy-related event automatically becomes a ‘show cause event’. This requires the solicitor to show cause and explain why, despite the event, they consider themselves to be still fit and proper to hold a practising certificate.

 If the Law Society determines that the solicitor is still otherwise fit and proper to continue practising, it may then impose an undertaking (or limit) on the Solicitor’s Practising Certificate. This specifies any areas of the law in which they are prevented from practising, such as:

  • Handling trust accounts
  • Acting as the trustee for any real or personal property
  • Acting as an executor or administrator of a deceased person’s estate, or
  • Any role or instrument whose authority can ‘exercise the disposition of property and not engage in any activity from which a bankrupt person is disqualified from under any Federal or NSW law’ until they are discharged from their bankruptcy.

Will my employer be notified of my bankruptcy?

Your employer is not ordinarily notified of your bankruptcy.

However, if your employer is a creditor, they will be informed together with all other creditors.

If you’re required to pay compulsory income contributions, and you fail to do so independently, your employer may receive a notice requiring them to pay on your behalf. But if you pay your contributions to the trustee directly, it’s unlikely that this would occur.

Can I keep running my business if I am bankrupt?

Under certain circumstances, you can operate a business while bankrupt.

While you’re unable to act as the director of a company or the trustee of a trust when bankrupt, you may retain or register an Australia Business Number (ABN) as a sole trader or as a member of a new partnership.

Any partnerships that existed before the date of your bankruptcy will be dissolved. Existing companies and trusts may be liquidated or wound up as a result of your bankruptcy.

If you decide to trade as a sole trader or under a new partnership, you must trade under your own name. If you use a trading name, you must disclose your bankruptcy to all who you trade with.

If you’re borrowing money or paying for goods or services via cheque or credit while undischarged from bankruptcy, you’re legally obligated to inform the creditor of your status as an undischarged bankrupt if the amount you’re borrowing exceeds the current credit limit. Failure to do this can result in criminal penalties.

Income earned from your business will become assessable under the Bankruptcy Act. It’s also important to consider that the rules regarding protected and unprotected assets in bankruptcy will still apply to you and your business.

Do I have to make payments from my income to the trustee?

During the period in which you’re bankrupt, your trustee is required to assess your income for compulsory income contribution purposes.

You become liable for Income contribution payments if your income is more than the statutory threshold. Factors affecting the assessment include the amount of income tax payable, any child support or maintenance payable, and the number of dependants you support.

Concerning how these contributions are paid, here’s what we do; all of our bankrupt clients have their very own estate account, so when we complete income contribution assessments and notify our clients in writing, the letter will outline the following;

  • How much we have assessed that you need to pay for the year
  • The weekly, fortnightly or monthly payment amount – we like to break it down to align with your pay cycle
  • A handy payment schedule so that you know exactly when you need to make your payments, and
  • The banking details (ie the BSB and account number) for your estate account so that you can make these payments directly.

Your income contributions are compulsory, so it’s important to understand that if you don’t make them voluntarily, they may be directly deducted from your income via your employer.

Discharge from bankruptcy

When will I be discharged from my bankruptcy and what does it mean?

The bankruptcy period automatically ends 3 years and 1 day after the date on which the Official Receiver accepts your Statement of Affairs. This is, of course, unless an Objection to Discharge has been lodged by your trustee. Your bankruptcy may then be extended to 5 or 8 years if the trustee lodges an objection to your discharge.

Your trustee only assesses your income for the period in which you’re bankrupt.

When you’re discharged from bankruptcy, there are no longer any restrictions on your ability to purchase or own assets, and you no longer need to seek consent from your trustee to travel overseas.

Your bankruptcy will be noted on the NPII and updated to reflect that you‘ve been discharged when applicable.

The fact that you’ve been discharged will also be noted on your credit record until such time that evidence of your bankruptcy disappears altogether.

Bankruptcy Act administrations (including Part IX Debt Agreements, Part X Personal Insolvency Agreements and Bankruptcy) are all recorded on your credit record for a total of 5 years.

Can I be released from my bankruptcy earlier?

Yes. You may be released early from your bankruptcy by having the bankruptcy annulled. This is effectively the cancellation of your bankruptcy.

An annulment can be achieved in a few different ways:

  1. You pay your creditors in full, together with the bankruptcy administration costs as at the date of annulment.
  2. By a court determination, following your application for annulment.
  3. You propose a composition or arrangement under section 73 of the Bankruptcy Act with your creditors (this happens when you request your trustee to convene a meeting of your creditors, and they accept the arrangement).

Unless your bankruptcy is annulled, you’d ordinarily be automatically discharged from bankruptcy 3 years, and 1 day from the date the Official Receiver accepted your Statement of Affairs form.

What is a Section 73 annulment?

At any point during your bankruptcy, you may propose an offer to creditors (through your trustee) for the purpose of compromising the debt and annulling the bankruptcy.

These offers are called compositions and arrangements. The process of proposing a composition or arrangement begins with you lodging a written and signed offer with your trustee. The offer will set out the terms of the proposal, as well as the payment of your trustee’s fees and expenses.

The offer may involve:

  • Assets already in the bankruptcy; and/or
  • Money or assets that would not normally be available to creditors, such as money provided by a relative (either paid in lump sum or via instalments over a period).

These offers are generally designed to benefit creditors. This is because they normally result in your creditors receiving a return that would not be otherwise available if you were to continue until your automatic discharge date.

Your trustee may call a meeting of creditors to consider and vote on your offer. The notice of the meeting will be published on the Australian Financial Security Authority’s (AFSA) website, and your creditors will each be sent:

  • A meeting notice and agenda
  • A copy of your offer, and
  • Your trustee’s creditors’ report

Your trustee will provide a report to your creditors outlining the offer and whether they’ll benefit if it’s accepted. It will also include details such as:

  • Who is providing the funds
  • Any assets, realisations and dividends
  • The trustee’s fees and expenses, and
  • Your conduct and financial dealings.

Acceptance requires a ‘yes’ vote from a majority of voting creditors who represent at least 75% of the claims in dollar value (know as a special resolution).

If your offer is accepted, your bankruptcy will be annulled immediately and your:

  • Trustee’s fees and charges will be paid, and
  • Creditors will be paid.

All of your creditors with debts that can be claimed in your bankruptcy are bound by the terms of the offer, even if only 80% vote for it.

If your offer is rejected, your bankruptcy will continue and your trustee will:

  • Keep funds covering the expenses and fees of calling the meeting from any deposit, in addition to their fees for putting the proposal together, and
  • Refund any remaining money provided for the offer.

General questions

Will I be able to borrow again if I file for bankruptcy?

Bankruptcy laws do not specifically prevent you from borrowing money either during your bankruptcy or after your bankruptcy has been discharged. However, you must disclose your bankruptcy when borrowing over the credit limit during the period of your bankruptcy.

Implications on your credit file may limit your ability to borrow money or buy things on credit, even after you’ve been discharged, but remember that your credit report will be free of any bankruptcy listing after 5 years from the date of your bankruptcy. If you have any queries regarding your credit rating, you may want to contact Equifax or Dunn and Bradstreet Australia.

Can I have a bank/cheque account during my bankruptcy?

Yes, of course. Most financial institutions will allow you to maintain your existing bank account after you’ve filed for bankruptcy. You might also want to look into getting a Debit Card if you still need to use Visa or MasterCard payment facilities.

Can I travel overseas while bankrupt?

You can travel, but you must first obtain written permission from your trustee in order to leave Australia.

Once you become aware that you may need to leave Australia, you should write to your trustee (doing so well in advance of the proposed departure date) outlining the details of your intended travel. It’s an offence to leave Australia without the written permission of your trustee, and this can result in your bankruptcy period being extended to either 5 or 8 years.

But on the bright side, we find that most people don’t have an issue when applying for permission to travel. As long as you’re doing all the right things in bankruptcy, it’s pretty unlikely that you will encounter a problem.

What are my responsibilities once bankrupt?

You have an obligation under the Bankruptcy Act to co-operate with your trustee. This includes responding to all reasonable requests for information that the trustee makes about your affairs.

While bankrupt, you have an ongoing obligation to keep your trustee fully informed of any changes in your circumstances. This includes changes to anything such as your current address, contact details, name changes, employment or income, marital status and dependants, receipt of any lottery wins, or any interest in any deceased estates.

Are there offences under bankruptcy?

Yes. Offences include (but are not limited to):

  • Disposing of property before bankruptcy with intent to defeat your creditors
  • Failing to disclose assets
  • Deliberately obtaining credit when you know you cannot pay it back
  • Gambling and speculation that results in bankruptcy
  • Incurring debts during bankruptcy for over a set limit (this limit is determined as an indexed amount by AFSA) without disclosing that you’re bankrupt
  • Operating a business under an assumed name, without advising those you are dealing with of your bankruptcy
  • Leaving Australia without your trustee’s permission, and/or
  • Failing to notify your trustee of any changes in your personal circumstances, such as a name, address or contact telephone number change, employment or income change, or even a change in dependants.

The penalties for these offences vary from 6 months to 3 years imprisonment upon conviction.

But don’t stress, it’s easy enough to keep your trustee informed. If we consent to be your trustee, you will have your very own dedicated case manager, who will be your main point of contact throughout the duration of your bankruptcy.

Your case manager can be easily reached by phone, email or post, so you’ll be able to let them know about any changes in your circumstances.

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