Are you struggling with your personal or business debts?
Are your personal or business debts out of control? Have you been thinking about going bankrupt for a while now but have some nagging concern about it? Maybe the thought of bankruptcy has crossed your mind at some stage but you have been too afraid to take the next and most difficult step – finding out whether or not bankruptcy is right for you. We know that just the thought of bankruptcy is scary enough without having it become a reality. We understand that there is an overwhelming sense of failure in this process. Its more than likely you feel trapped like you have no other option. That’s where the team at Bankruptcy Australia can help you right now.
You Can Be 100 % Debt Free!
Making the big decision to go bankrupt can be a little less painful if you sit down and add up all the debt you have and then work out how long it is going to take you to pay it all off, and if the answer is longer than 3 years then bankruptcy might be right for you. We can help you build a future free from blocked phone calls and one where you can look forward to getting the mail again. However there are a few things you need to know before you make that very difficult decision to declare bankruptcy. We call these few things the “Big 5” or in other words the big 5 questions you must get the answer to before you file for bankruptcy. Remember the golden rule in all insolvency in Australia the sooner you act the more options you will have.
5 Questions you must answer before you declare yourself bankrupt.
There are 5 crucial questions you must have an answer to before you declare bankruptcy. If you want to know what they are feel free to download the free E-book on the right hand side of this page. It will answer these critical questions in great detail to help give you peace of mind, and that you are making the right decision. Simply fill in the form to the right with your name email and phone number and we will email you a copy of the book right away, we won’t put you on our database and email for the next 5 years. All we may do is call you to see if we can help you with any particular question you may have and that’s it!
Is bankrupt my only option?
No! There may be several options available to you depending on your situation. Below is a chart outlining all of the pros and cons of various debt solutions. This chart is by no means comprehensive but it will allow you to make an informed decision.
What is a Personal Insolvency Agreement?
This is flexible financial agreement between you and your creditors (the people you owe money too). A trustee administers when you need to pay and how much etc. When those conditions have been met you are can begin with a fresh start. Wouldn’t it be wonderful if you creditors agreed to settle your debts for 1 cent in the dollar, unfortunately these days it more like 70 cents in the dollar.
Why you may prefer to consider a Personal Insolvency Agreement
Pros – Personal Insolvency Agreements
- Avoid bankruptcy
- Possibly limit liability to make income contributions
- You pay back 50 to 70 cents in the dollar to your creditors
- It could be a very a quick process.
- May get to keep important assets.
- The debtors assets are independently handled
- Lower legal costs associated with court proceedings
Cons – Personal Insolvency Agreements
- You are not free until you have paid debt
- It may take several years to pay off the debt
- It still impacts your credit score for 5 years the exact same as bankruptcy
- You cannot be a company director until the debt is paid off
- You are required to have a meeting with your creditor one-on-one
- Your details will be published in a local paper.
What is a Debt Agreement?
This is similar to a personal insolvency agreement where you still have to pay back the debt. A debtor can enter into a legal arrangement with their creditors over payment arrangement without being declared bankrupt.
Can I Enter into a Debt Agreement?
Yes you can however you need to show you have sufficient income to re-pay the debt, much like applying for a loan. If you are bound by an existing Debt Agreement, or have been bankrupt, you cannot enter into a Debt Agreement. There are also income restrictions, property value and unsecured debt value restrictions. If you want to know more please call us on 1300 795 575. The biggest and most obvious downside to these you have all negatives of bankruptcy but you still have to pay back the debt, in spite of the slick television commercial think carefully about this as an option in most cases its not a solution its just moving the problem from a handful of creditors to once creditor, and you are no better off. There are certain circumstance when will would advise you to enter into one of these but to be sure give us a call first on 1300 795 575.
Pros – Debt Agreement
- Avoid Bankruptcy
- Stops creditors – can not take any further actions to recover their debts;.
- You may have the ability to keep important assets.
Cons – Debt Agreement.
- There is an upfront cost to start off.
- You have to be approved. If you don’t make enough you will be refused.
- If you don’t make your payments the agreement may be terminated and then the creditors can resume collection of their debts;.
- The debtor details will turn up on the National Personal Insolvency.
- Index (NPII) from the date that the debt agreement proposal was agreed to by AFSA.
- It still affects your credit rating for 5 years the same as bankruptcy.
- Nothing changes with secured creditors rights they may repossess if the debtor is in default.
Why do some companies say Debt Agreements or Personal Insolvency Agreements are the way to go? The main reason you find plenty of ads on TV enticing you to sign up for one of these debt options is simple, there is plenty of money in it for the companies that administer these arrangements, at the very lease 20% commission on every cent you pay back. You may also notice, if you haven’t already, that when it comes to financial advice every company tends to giveadvice according to the product or service that they offer. For example Debt Agreement Companies ridicule bankruptcy companies and so it goes with much of the financial services industry.
Should I consider a Debt Consolidation Loan?
There may be the occasional circumstance where a debt consolidation loan is a good idea. Generally, however, this option just bundles 3 to 15 different small loans into one great big hard to repay loan. If you are flat out paying all these different loans now, why do you think it will be magically easier to have one enormous bill? Just to add insult to injury you have to pay up front for the luxury of this option. If you want to get some clarity here simply give us a call on 1300 795 575 ordownload “The Big 5” e-Book.
BANKRUPTCY AND THE FAMILY HOME
Can I keep my house if I am bankrupt?
In most cases these days the answer is yes. If this is a significant concern for you then the best way to get the answer is to call us on 1300 795 575. Once we have understood your personal financial situation we can give you a clear picture about your house over the phone. Almost everyone is emotionally connected to their home. It’s where the children have taken their first steps, it’s where you live your life. People usually think losing the house or family home is an inevitable consequence of bankruptcy and as a result they push themselves to the brink of insanity trying to avoid bankruptcy at all costs, however it may be possible for you to declare bankruptcy and keep the family home.
Will the bank let me keep my house even if I’m a bankrupt?
Why, you might ask would the bank want bankrupt customers? In an ideal world the bank doesn’t want bankrupt customers, but think of it this way, whether you are bankrupt or not you still pay the bank a heap of interest each month. Wouldn’t they want to sell your house and not take the risk considering I’m bankrupt? Generally the bank that has generously lent you the money for your house is making good money every month in interest out of you, month in month out. As long as you keep up to date with your payments then the bank wants you in your home at all costs. If the bank is forced to sell your home it loses a customer. Ultimately however unless the trustee forces the bank to sell your home because there is too much equity in it or you are very behind on your mortgage it will gladly leave you in your home even if you are bankrupt.
What factors determine if I will lose my house?
If you are up to date with your payments then the biggest issue is equity. The trustee has a duty to gather up as much money to help pay your bills once you go bankrupt. Equity is the key here. If you have $300,000 equity in your home and you have $100,000 worth of debts and no other way to pay the debt then the trustee sees your equity as a way to pay back your debt, so the trustee will sell your house pay back the debt and give you whatever is left over.
How is equity determined?
Generally a registered valuer is the best and safest way to determine your current equity position. Maybe before you take the registered valuer step which will cost about $500 it may pay to ask the local real estate agent to give you an idea on what the house would sell for if you had to sell it quickly, there are a few things you need to know about this process so feel free to call us on 1300 795 575 for advice on the best way to go about this process. For a greater explanation about how your house will be considered feel free to download “The Big 5” e-book.
What if my partner’s name is on the house loan?
In many cases houses are purchased in joint names. In other words a couple may have purchased a house 50/50 using both incomes to make the payments. If one party declares bankruptcy and the other party doesn’t, the equity is only factored on the 50% of the property. So in other words if you have a house in joint names and your total equity position is $100,000 then your actual equity is half of that i.e. $50,000.
Are there many options when if comes to my house?
There are several options available to you when it comes to your house or any other asset when going bankrupt. You need to get the right advice about this. However, getting it wrong could be disastrous. If you have questions feel free to call us about your house on 1300 795 575.
What will happen to my house at the end of my Bankruptcy?
At the end of your bankruptcy 3 year period, you can have your house given back to you this comes at a cost in 2 ways. Firstly you will need to pay the trustee $2-3 thousand dollars to have the title of ownership changed on the deed and then the house is back in your name and its all done. The other factor is if over the 3 years you have been bankrupt your house increases in value you will be required to pay that gain to the trustee before they will put the house back in your name. You need to get the right advice about this. However, getting it wrong could be disastrous. If you have questions feel free to call us about your house on 1300 795 575.
BANKRUPTCY AND EMPLOYMENT
Will my employer be notified
Who will know about my bankruptcy?
There are four groups of people that will know that you are bankrupt.
- The people you tell.
- Your creditors or people you owe money to.
- The people that see your credit file while your bankrupt. The only way that will happen is if you sign a privacy release for them to access your credit file. You only ever do this when you apply for a loan.
- You will be listed on the National Insolvency Index but anyone seeking information has to pay to see if a person is listed as bankrupt.
At Bankruptcy Experts Australia we are fully aware that there is still a stigma about bankruptcy we understand this concern. We can help ensure that if you declare yourself bankrupt you don’t have to go to court or get your name in the newspapers or be publicly made out to be a criminal. We can help ensure bankruptcy is a simple and quick process. In fact the whole process will only take a few days. It enables ordinary people to get out of debt and on with their lives. For more detailed information about employment download “The Big 5” e-Book.
Will I lose my job if I file for bankruptcy?
The answer to the question is sometimes. The problem with some professions isn’t that you can’t do the job any longer, it’s more an issue of professional bodies or associations that view bankruptcy in a dim light and can make it difficult for you. The best option is to check first before filing for bankruptcy. Check if your profession is on the list below. If it is, then contact them personally and explain your situation. Some associations won’t have a problem with your bankruptcy as long as it wasn’t accompanied by shady or questionable behaviour.
If you think you employment may be affected by your possible bankruptcy give us a call on 1300 795 575.
BANKRUPTCY AND INCOME
Will my earnings be impacted if I go bankrupt?
The answer to the question is possibly. The first thing you need to know about going bankrupt is there is no restriction on how much you can earn. However, I will point out that your income is a significant consideration when working through whether you need to declare bankruptcy. The very first thing you have to know is just how much you can earn before you start paying back money to your creditors via your trustee (see summary below). Net income is the pre-tax / in the hand amount you earn each year. A dependant is someone who lives with you and earns less than $3,124 per year (no matter their age). You can obtain a hardship variation that raises the threshold amount, if you have expenses such as medical, child care, substantial travel to and from work, or a circumstance where your spouse used to work but is no longer able to add to the household income. Child support is always considered in bankruptcy, if you receive child support that is not factored in as income. If you pay child support this will be also taken into consideration, for example if you pay $5,000 child support annually and you have no dependants living with you then your revised net income limit would be $55,332.10. If you need more details about your income thresholds go ahead and download “The Big 5” E-book. there are some cases as a result of income that it is not an economically viable option to declare bankruptcy because you earn too much in comparison to the debt you have.
What is your money worth in 2016?
Changes are coming to the world of bankruptcy, if you need to know what is happening, then pay attention here. Since March 2016 there has certainly been changes to the Income Threshold Amounts. This means that there are changes to just how much money you can keep when bankrupt, this is basically your net income right after tax and child support (if applicable) is deducted. If you’re in business whilst bankrupt, then of course it’s also after net (after tax) business expenditures, which is generally determined annually.
Your net income could be adjusted to take into consideration things like salary sacrifice and high superannuation payments etc. Your net income can also allow added unusual costs incurred as a result of being employed, for instance if you incur an unusually high amount of travel expenses to get to and from your job this can in some cases also be considered. Your bankruptcy trustee must identify your real net income according to the bankruptcy rules.
The income threshold numbers are also per person, and are calibrated by the Government each and every March and September to allow for the movements in the cost of living.
As of March 2016 the income thresholds are as follows;
With no dependents your net income can be $54,518.10 net per annum, i.e. that’s about $1,048.25 net per week take home pay. This is your cash. It’s all yours. It’s what you can keep, and so anything over that amount is split 50/50 with your bankruptcy trustee to be settled to your creditors.
With 1 dependent your net income can be $64,331.36 net per annum, i.e. about $1,237.14 net weekly take home pay.
With 2 dependents your net income can be $69,237.99 net per annum, i.e. approximately $1,331.49 net each week take home pay.
With 3 dependents your net income can be $71,963.89 net per annum, i.e. approximately $1,383.92 net each week take home pay.
With 4 dependents your net income can be $73,054.25 net per annum, i.e. about $1,404.88 net each week take home pay.
With more than 4 dependents your net income can be $74,144.62 net per annum, i.e. approximately $1,425.85 net every week take home pay.
If you believe your situation is more complicated, then please get expert advice. If you have a particular income question just give us a call here at Bankruptcy Experts on 1300 795 575.
What can my partner earn if I go bankrupt?
There is no limit to what your spouse can earn. Your other half can earn a million dollars and they will not be required to contribute to your debts. What if my spouse/partner and I both need to go bankrupt? If a husband and wife each go bankrupt, and say that they’ve got no dependants, then they can each earn $1,010.45 net. A practical way to understand it is the same income rules apply for each person in the home.
Who is considered a dependent?
In the case of bankruptcy a dependent is anyone you support who earns less that $3,343 per year.
BANKRUPTCY AND SELF EMPLOYMENT
Will I lose my small business if I go bankrupt?
The simple answer is you don’t have to but you do need to get the right guidance. Company insolvency laws are very involved and you need to tread carefully if you wish to continue to be self-employed. You may already recognize that you can no longer be the director of a Pty Ltd Company if you are bankrupt, even so that doesn’t inevitably mean you can’t run your very own business and employ staff etc.
What if my business has serious debts?
As a part of your bankruptcy we can help you wipe out your business debts so you can get a fresh start.
Should I put my company into liquidation?
Among the main reasons you may wish to consider liquidation as opposed to bankruptcy is because if you liquidate your company, it doesn’t inevitably mean you have to go bankrupt. In Australia, businesses that become insolvent have a few options, such as liquidation, voluntary administration and so forth. If you need to know more about liquidation and company re-structuring, go to the next page of this website, as there is a lot more about it there and or download “The Big 5” e-Book. Don’t forget, it’s the individuals who go bankrupt, not businesses. This is a difficult area, so get some expert advice on this if you have an enterprise. Commonly speaking, the debts in a business and personal debts go hand in hand when a company owner goes bankrupt.
What impact will bankruptcy have on my business?
A restriction that applies when you are bankrupt as a business owner is that you can be in your own business as a sole trader only. For some business owners, bankruptcy influences their ability to run the business because of the licensing issues discussed in chapter two. For example, if you run a building company, your license will be suspend once you’re bankrupt and as a consequence you can no longer trade without that license.
Isn’t it illegal to run a similar business after bankruptcy?
It could be. There are considerations when and if you declare bankruptcy as a business owner: you can not run up heaps of debt in your business, then go bankrupt and then open the doors the next day like nothing has happened. There are laws in place to prevent what is called “phoenix companies” rising up out of the ashes of an old company. Don’t get overly stressed about what you can and can’t do as a company owner; just get the correct advice and call Bankruptcy Experts Australia today 1300 795 575.