When you have reached a stage where you are unable to pay back your debts, it may be time to consider bankruptcy. Bankruptcy should be used as a last resort and has serious consequences for your financial future, some which are permanent.
Before you make any decisions make sure to talk to one of our consultants to ensure this is the right solution for you.
WHAT IS BANKRUPTCY?
Bankruptcy is a formal process whereby you declare to all your creditors you are unable to pay back your debts. Declaring bankruptcy is often a painful process, but eventually releases you from many of your debt obligations.
As an individual, you have the ability to voluntarily declare bankruptcy if you have a debt you cannot repay. When you voluntarily declare bankruptcy, a trustee is appointed by the Australian Financial Security Authority (AFSA) to manage your financial affairs on your behalf.
Your creditors can also force you into bankruptcy if you have failed to meet you financial obligations, and have debts totalling more than $5,000.
THE EFFECTS OF BANKRUPTCY
There are some serious consequences to declaring bankruptcy including:
- Your assets can be sold by the trustee (including those you acquire or become entitled to during your bankruptcy) in order to cover your debts
- Any income you earn over a certain limit will be taken by the trustee and used to pay off your debt
- You will be unable to work in certain professions for a period of time and will be temporarily or permanently barred from holding some industry licences. Professions affected include;
- Law enforcement
- Most trades
- Defence force
- Justice of the Peace
- Liquor licensor
- Travel agents
- Your name will appear on the National Personal Insolvency Index (NPII) for life
- You are unable to travel overseas unless you have permission from the trustee during your period of bankruptcy.
- Some debts can’t be extinguished through bankruptcy eg.
- Court costs
- Child support
- Debt secured through fraud
- Some ATO debts