Bankruptcy

Borrowing, banking and renting

Life after bankruptcy

Your credit record

Two of the more commonly used credit reporting agencies in Australia are Equifax and Dunn & Bradstreet. Creditor providers use such credit reporting bureaus when trying to assess your credit worthiness.

These organisations maintain your credit report. This is a report that contains personal details, loan enquiries, credit providers, serious debts and credit infringements, commercial credit and information pertaining to bankruptcy and defaults judgements.

Bankruptcy listings last for 5 years on your credit report, after which your report will be free of any information regarding your bankruptcy. This means that you will be able to apply for a mortgage, personal loan or credit card without the lender being biased by your history.

“We’ve recently purchased a new car. We were successful because the finance company we used was the same as previously and because we continued to keep up to date with our payments while bankrupt, so they were happy to lend to us again.”

BRYAN, NSW

Your ability to get credit in the future

Contrary to popular belief, it is possible to borrow again after bankruptcy.

Your ability to do so will depend on your specific circumstances that can include income, your ability to pay back the loan, your recent payment history and savings – especially if you’re applying for a mortgage.

“I have bought a house, have a mortgage and have credit cards.”

GRAHAM, VIC

 

Watch our video about borrowing after bankruptcy

Your ability to own a bank account

Bank accounts (excluding overdraft accounts) are not a form of credit, so having one (or several) is typically not an issue when you become bankrupt. Most people will still need access to VISA or MasterCard facilities throughout their bankruptcy, which can be organised via a Debit Card. Debit Cards are not the same as Credit Cards because they use the money in your bank account, not the lender’s money. Most major banks and financial instituions can provide Debit Cards to customers with normal transactional bank accounts.

“There have been no difficulties or challenges in respect to my personal banking.”

MICHELLE, VIC

Your ability to rent a property

Property rental is a common concern among people considering bankruptcy.

Based on our collective experience, and combined with the experience of our clients, we can say that while it may seem like a legitimate concern to have (and for some people it is), we rarely find that this concern ends up being warranted.

Every rental application is different. Some will ask if you’re bankrupt, while others will focus solely on your ability to service the rental fees. Even if you are asked about the status of your insolvency, this doesn’t automatically mean that your application will be rejected.

There are close to 20,000 people filing for bankruptcy in Australia every year. More than half of these people are renting. If more than 10,000 people were truly being rendered homeless due to their inability to rent a property during bankruptcy, we would be acutely aware of it by now wouldn’t we?

Let’s stop for a minute to look at the facts surrounding home rental and bankruptcy.

  1. Bankruptcy only covers the debts that you owed before you became bankrupt, not after. So, just like every other tenant, you’ll still be liable for the rental fees you incur after the date of your bankruptcy. You’re also subject to the same rules – if you fail to pay your rent, your landlord can take the appropriate measures to evict you, irrespective of whether or not you’re bankrupt. You’re also protected by the law – provided you adhere to the housing rental agreement, the Bankruptcy Act ensures that you cannot legally be evicted solely because of being bankrupt.
  2. Being bankrupt could provide greater security for the landlord than you being insolvent. Why? This means that your risk of defaulting on rent is greatly reduced in comparison to your position when insolvent. So logically speaking, leasing to you when bankrupt could actually be less risky than leasing to you prior to bankruptcy.
  3. Real estate agents and landlords cannot just access your credit record without you knowing. You must provide them with consent to obtain a copy of your credit report.
  4. And most importantly, your rental history is key. A bad reference can limit your options. A good rental history, however, will be an incredible asset.

“I didn’t find difficulty in renting as it’s not a question when completing the form for a rental property. I moved into a townhouse within months of my bankruptcy and it did not affect me in any way.”

MANOJ, NSW

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