A person is legally released from all his debts when he declares bankruptcy. Any amount of debt that you are unable to pay allows you to voluntarily apply for bankruptcy.
In Australia, the AFSA or Australian Financial Security Authority appoints a trustee when you voluntarily declare bankruptcy. The appointed trustee will see to your financial situation. You are considered officially bankrupt upon receiving advice from AFSA.
However, bankruptcy can also be forced on you. An overall total debt of at least $5,000 that creditors have unsuccessfully tried to make you pay can force you to file for bankruptcy.
It’s a different scenario when you are forced to declare bankruptcy. The state of your financial affairs will now be taken over by a private trustee. This particular service charges very high fees.
If you want to find out how to file for bankruptcy in Australia, read the tips below.
What happens after you file for bankruptcy?
There are two possible scenarios that will happen after you declare bankruptcy, to include:
- You may lose significant assets and even your home. You will find it difficult to obtain credit for a long time. Your future options for employment become limited.
- On the other side of the coin, bankruptcy may bring a positive outlook on your life. Financially starting over is capable of providing a positive impact on your life.
However, if filing for bankruptcy is not the option, acting quickly by getting independent advice from a financial counselor is the best way. Bankruptcy has advantages and disadvantages that you have to know more about.
What about your assets?
There are assets that are not subject to bankruptcy. On the other hand, there are also assets you will have to lose as soon as you declare bankruptcy.
Assets that will have to go:
- More than $1,000 money in your bank accounts
- Real estate to include land and home
- Some personal jewellery and valuable artworks
- Cars you own showing the equity of more than $7,700
- Any winnings, inheritance or tax refunds
- Luxury electronic items
- Trade tools with a value of more than $3,750
Assets that will stay with you:
- Payments received as compensation for personal injury, superannuation, and payments from life insurance policies
- Trade tools valued at $3,750
- Bank accounts containing up to $1,000. This is seen to help defray living expenses
- Ordinary personal items such as your computer, furniture, and the TV
- A car that shows the equity of less than $7,700
Future employment limitations
There are certain future employment constraints for the time covered by your bankruptcy. You are prevented from managing a company or become one of its directors during the period of bankruptcy. Only permission from the court will lift this employment restriction.
Other than the limitations imposed on managerial positions, other forms of employment impediments imposed by bankruptcy include:
- Trade associations may block any statutory positions you may apply for
- Professional bodies may impose limitations on your membership for the entire bankruptcy period
Declaring or filing for bankruptcy can be a scary experience for anyone. It may seem like a desperate move on the part of any individual. It may seem so, but declaring bankruptcy can also be a way out.
Are your debts out of line or are you hounded by bill collectors? We are ready to extend a helping hand.