Bankruptcy in Australia - does it matter if it is voluntary?

When it comes to Bankruptcy Australia, normally people aren't aware that there may be both voluntary, and involuntary bankruptcy - each have different approaches and rules.

Involuntary bankruptcy takes place when somebody you owe money to applies to the court to declare you bankrupt. Usually when you get one of these types of notices, you have actually 21 days to pay all the debt. If you do not, then the creditor returns to the court and requests the court to provide a sequestration order that declares you bankrupt. A trustee is selected, and then you have 14 days to get the documentation in and after that you are bankrupt.

You can object to a bankruptcy notice by going to court immediately after the 21 days have expired and put your case forward, to prevent it going to the next level. Other than the way you became bankrupt there is in reality no distinction between Involuntary Bankruptcy and or Voluntary Bankruptcy - once you are declared bankrupt, they're overseen to in the very same way.

However, when it comes to Bankruptcy for this, the stress, torment and fear that accompanies this method is incredible. If you think you are in all likelihood to be made bankrupt by someone, get some help and act on that advice. Generally I've found it's always much better to know what you can and can't do before you have an individual bankrupt you. Once you are bankrupt, it's usually too late.

Voluntary Bankruptcy

However, when it comes to Bankruptcy, sometimes there are times that it is the most ideal option. So you may need to ask yourself, 'when should I consider voluntary Bankruptcy?'.

This question is not the very same for everybody of course, but ordinarily I find that one way you could work it out is to figure out just how long it will take you to pay each of your debts - if its longer than 3 years (the period you are declared bankrupt), then this may assist you make that decision, and help you to understand Bankruptcy.

Once, I had an 80 year old pensioner, who came to me once regarding * Bankrupcty tell me that her credit card statement calculated how long her debt would take to pay at the level she was paying off her account, and it was 35 years! Imagine 35 years for one credit card bill.

Credit rating damage can really help you think this through. If you move house and forget to pay your $30 phone bill for 6 months more, it's very likely the phone service will default your credit file. That default will sit on your file for 5 years, so for $30 you can have your credit file very seriously damaged for that period of time - and all of this will impact how you need to approach Bankruptcy.

In many ways, the ease with which companies/credit providers can default your credit file is unjustifiable. The punishment doesn't seem to amount to the crime in my book. So if you actually have defaults on your credit report for 5 years, bear in mind that bankruptcy is on your credit file for a total 7 years then its rubbed out completely.

So if your credit rating is a big issue in trying to decide whether to participate in a Debt Agreement or Personal Insolvency Agreement or Bankruptcy remember they will all sit on your credit file for a total of 7 years. The biggest change is that with a DA or PIA you repay the money and nevertheless have it on your file for 7 years.

Bankruptcy

I have stated the word a few times now, but when it comes down to it, Bankruptcy is the biggest part, and the element most people are afraid of when they come to me to discuss their financial situation and Bankruptcy. The other side of crime and punishment equation is bankruptcy, and in this country the arrangements are very generous: you can go bankrupt owing millions of dollars and after 3 years it's all finished with no strings attached. Compared with countries like the United States, our bankruptcy laws are quite reasonable.

I don't pretend to know why that is but a couple of hundred years ago debtors went to prison. These days I suppose the government feels the sooner it can get you back on your feet working and paying tax, the better. It makes more sense than locking you up which in turn costs the taxpayer anyway.

Bankruptcy wipes all your debts including ATO debts with the exception of a few things:

·         Centrelink Debts, Court Fines like parking and speeding fines.

·         HECS or Fee Help loans.

·         Money to take care of a car accident if the car was not insured.

There is much more that can be said about this and Bankruptcy in general but the purpose of this blog was to help you decide between a few available options. When getting some advice, keep in mind that there are always options when it involves Bankruptcy in Australia, so do some research, and Good luck!

If you would like to find out more about just what to do, where to turn and what questions to ask about Bankruptcy, then feel free to reach out to Bankruptcy Australia on 1300 795 575, or visit our website:bankruptcy-australia.net.au

Bankruptcy in Australia - Will my income be changed if I go bankrupt?

Bankruptcy Australia is a challenging process, and you should ensure you get the right advice. And when it comes to your income being affected, the answer to the question is maybe. The first thing you need to know about going bankrupt is there is no regulation on how much you can earn. However, I will mention that your income is a serious consideration when working through when it comes to Bankruptcy.

The first thing you need to understand about this area of Bankruptcy is the amount you can earn before you start paying back money to your creditors via your trustee (see table below).

Net income is the pre-tax/ in the hand sum you earn annually. A dependant is someone who lives with you and earns less than $3,124 per year (regardless of their age).

You can request a hardship variation that raises the threshold amount, if you have financial commitments in Australia like medical, child care, significant travel to and from work, or a circumstance where your spouse used to work but is no longer able to add to the family income.

Some of the useful parts of Bankruptcy is that your employer will not be notified when you file for bankruptcy. Also, 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 considered, for example if you provide $5,000 child support each year and you have no dependents living with you then your revised net income limit will be $55,332.10.

There are more issues involving income and what is or isn't thought of as income - if you're not exactly sure, it's best to get professional advice. The reason you have to consider your income as a part of the Big 5 questions here is that bankruptcy is in some situations not an economically viable option.

If one of your creditors is the ATO (for unpaid taxes), then your tax refund can be taken by the ATO while you are bankrupt to contribute toward your tax bill. If you don't have a tax bill then you will keep your tax refund so long as that doesn't take you over your threshold income restrictions.

If you believe that when it comes to Bankruptcy, your case is more complicated, then feel free to get professional advice in Australia. I may seem like a broken record, but keep in mind that it's always a smart idea to overcome these options prior to declaring bankruptcy, because once you have filed the paperwork it's too late to change your mind.

If you want to find out more about what to do, where to turn and what problems to ask about Bankruptcy, then feel free to contact Bankruptcy Australia on 1300 795 575, or check out our website: bankruptcy-australia.net.au