Bankruptcy Australia, What is the Deal with Debts?

So what Debts are eliminated if I go Bankrupt?

The basic answer is that when it concerns Bankruptcy most debts are wiped, and I have added a summary below for you to look at.

But, put simply some of the exceptions are Centrelink Debts, Child Support, Court fines (like speeding fines) and even any debts arising from uninsured Motor-vehicle claims and educational debts for instance, HECS or FEE-HELP. These debts are not wiped out when you file for bankruptcy.

What about Secured Debts?

A secured debt is a car loan or a home loan; it is a debt that has some definite security affixed to it. So for example if you buy a new car for $40,000 dollars the security for this car is the actual car itself.

So, can my secured debts be removed if I file for bankruptcy?

Yes. If you have a car loan for $40,000 you can have that debt eliminated if you simply return the car. So the lesson is that you cannot have your cake and eat it too (so to speak), so yes all of your secured debts might be wiped but the asset has to be sold or returned. This is just one aspect that, when it comes to Bankruptcy, it is vital to get professional advice - like that offered at Bankruptcy Australia.

What about my Tax Debts with the ATO can they be cleared away If I go bankrupt?

Yes they can, both business and personal debts owing to the ATO can be cleared away with bankruptcy. If you have a business with any sort of debts receive some advice because it is not always so self-explanatory. Feel free to call us right here at Bankruptcy Australia if you have any type of questions on 1300 795 575. Or feel free to go to our website: www.bankruptcyexpertsAustralia.com.au

What about my business or Company debts?

Sometimes when it concerns Bankruptcy we can help you with your business debts, call us about this first. Remember bankruptcy applies to an individual not companies, trusts or businesses. Normally you may need to liquidate a company to deal with the debt this way. And when it comes to Bankruptcy, it can be a confusing area, so remember there are implications for a business owner such as insolvent trading. At Bankruptcy Australia we specialise in business and personal debts so call us here at Bankruptcy Australia if you have any questions regarding Bankruptcy on 1300 795 575. Or feel free to explore our website: www.bankruptcy-australia.net.au

Bankruptcy, Will I lose my Superannuation?

Bankruptcy in Australia can be involved and confusing. A question we often get asked here over at Bankruptcy Australia is 'what happens to my super if I apply for Bankruptcy'? The reply for most is easy, if your super is normally in a regulated fund or industry fund like Sunsuper or Host Plus then virtually nothing happens; your super is 100 % safe when it comes down to Bankruptcy.

What if I have a Self Managed Super Fund?

This is a growing concern, take into account the increasing number of members of Self-Managed Super Funds ("SMSFs") lately; the ATO tells us it has increased Australia-wide from 758,589 in 2009 to 1,011,689 in 2014. So what happens to these Superfunds when it concerns Bankruptcy?

Remember Bankruptcy Australia is not indicating this article is the complete story, if you have any questions feel free to contact us on 1300 795 575. No matter if you call us or another person it does not matter, just please don't walk into bankruptcy blind when it comes to your SMSF actually we strongly recommend you obtain both legal and financial advice before proceeding with any of the actions suggested in this article.

What is a Disqualified Person?

First and foremost, if you are considering Bankruptcy, you can not be a part of a SMSF. Why? Because if you are going up against bankruptcy, you will be classified as a 'disqualified person'. And a disqualified person cannot operate as an Individual Trustee. This poses a problem due to the fact that usually most of the SMSFs are just 2 people, which means both of these members have to also be the individual trustees. The position of trustee sets a lot of legal rules, and if you are in this position I would highly recommend you to end up being familiar with them all-- including the fact that you can not 'know or suspect' that one of you are bankrupt. So you can see how an individual bankruptcy can be very damaging to a SMSF and as you can assume the process of Bankruptcy for a SMSF is rather convoluted.

How much time do I have to restructure my SMSF Fund after I'm bankrupt?

So what happens if one of the members of an SMSF does enter Bankruptcy?

For starters, the SMSF will need to be restructured. This means that you will want to consider your extensive structure and ensure that it is meeting the basic conditions, including having a new trustee that is not experiencing issues with Bankruptcy. The Australian Tax office will offer you a 6 month 'grace period' to get this done before you face penalties. And keep in mind, sometimes the best plan would be to simply roll the fund into an industry or corporate fund.

Beyond these large scale restructuring issues, there is a lot of paperwork to deal with too, and you need to be constantly keeping the ATO informed of what is happening. This indicates you need to let them know that you have a bankruptcy problem with your current trustee, that they are being removed as soon as possible know who the new trustee/director is. The Bankrupt will also have to inform the ATO using the form NAT 3036 (Found on the ATO website) and they must also notify ASIC of their resignation.

During that 6 month period you will need to remove the Bankrupt from the SMSF-- including their property and assets. Remember if you are uncertain call Bankruptcy Australia for some free advice on 1300 795 575.

What if I have a single member fund?

If you are a single member fund, then you will have to appoint a new director, and it will then end up being their obligation to oversee the sale and relocation of assets into a managed fund. If there are two or more members, than the bankrupt member will need to resign and the other member will clear away the property and halve the proceeds. They would then have to decide if they want to remain as a single member SMSF, or if they need to roll it all into a managed fund. If both members are entering bankruptcy, then they would need to sell all assets immediately and transfer the liquid assets to the managed fund.

From that you can notice how when it comes to Bankruptcy, even when one single member is facing issues, it can affect the very existence of an SMSF. If you are already facing this concern yourself, or with a partner in a SMSF, please seek financial advice to make sure you are satisfying the ATO requirements.

A simple solution ...

As I proposed earlier, a basic solution to your SMSF situation is to put your super back into a normal regulated managed fund prior to bankruptcy and save yourself all the problems outlined above. Bankruptcy is never easy, but finding proper advice is the best first step. If you want to discuss your options further, give us a call at Bankruptcy Australia or visit our website: www.bankruptcy-australia.net.au.au or just give us a call on 1300 795 575.

Bankruptcy in Australia - Will I lose my house if I go bankrupt?

Bankruptcy Australia is a challenging process, but I know from meeting with thousands facing the prospect of bankruptcy over the years, that very little troubles people more than the notion of losing the family house. Almost every person is on an emotional level connected to their home - it's where the kids have grown, it's where you appreciate life on a day to day basis.

Will you lose your home if you go bankrupt? The response is a resounding maybe. (not very useful, I know) People typically feel that it's an inevitable consequence and a part of Bankruptcy, and consequently push themselves to the brink of insanity to not lose the family home. But when it comes to the whole process of Bankruptcy, a key perk of Debt Agreements and Personal Insolvency Agreements is you can keep your house. The reason is simple: you've accepted to pay back the debt you are in.

So how is it possible to keep my Australia house, you ask? It's easier if I explain the basic guideline behind the Bankruptcy process as administered by the trustee, then you'll have a more clear picture.

The function of the bankruptcy trustee is to firstly abide by the regulation of the bankruptcy act 1966 (it's a very dry read about 600 pages if you are eager).

Within that regulatory framework, the trustee is to help recover monies owed to your creditors, that is carried out in a bunch of distinct ways but it mainly comes down to income and assets. The trustees role is to collect payments beyond your income threshold. The further role is to sell off any assets that can contribute to paying back your debts.

What this resembles is that yes the trustee will sell your house right? Not normally. The only reason the trustee will sell off any asset including your house is to get money to repay your debts. If there is no equity in your home then it's pointless to sell your home. This is happening increasingly since the GFC as house prices in many areas have been heading south so what you paid 4 years ago may not necessarily reflect the price today.

A quick word of advice here if you have a house in Australia and are looking at Bankruptcy: get a skilled professional to help you through this process, there are lots of variables in these scenarios that should be considered.

You might wonder, why would the bank want bankrupt clients? wouldn't they need to sell your house and not take the risk? The bank that has nicely lent you the money for your house is making good money every month in interest out of you, month in month out, provided that you keep up to date with your repayments then the bank really wants you in there at all costs. Ultimately however it's not the bank's call if the trustee establishes that there is plenty of equity in your house the trustee will force you and the bank to sell the house.

When you file for bankruptcy you are asked to make a note of the value of your house and the quantity you owe on the house. A tip if you are attempting to work out the value of your house: use a registered valuer as this will provide you peace of mind, don't use your neighbours' gut feel advice or a real estate agents advice to arrive at this figure. When you get a valuer out to your home, make sure you tell the valuer to value the property for a quick sale, make sure you mow the lawn and don't leave the kitchen in a mess also.

Valuers used to give two valuations: one for a quick sale and one for a well marketed non time delicate sale. Nowadays that's not the case, but if you meet them and let them know you need to sell your home in the next 30 days you may control the result. The idea is that you want a life-like sell now figure.

There are two main reasons this valuation system is critical to you: one you may have peace of mind ascertaining the market value of your house, and after that you can easily set up your equity position. Secondly, your home may be really worth a lot more than you thought. Get some tips before carrying this out. The number of times I've met with clients that have sold their family home of 20 years simply to discover I could of helped them keep it; unfortunately this happens all too often

When it concerns Bankruptcy and houses, another serious consideration is ownership, often houses are purchased in joint names. In other words a couple may be a house 50/50 using both incomes to make the payments. If one party declares bankruptcy and the other party does not, the equity is only factored on the 50 % of the property.

When it comes down to Bankruptcy, this is just one of potentially numerous scenarios that are likely when it comes down to the family home. Bear in mind the non-bankrupt party can buy the bankrupt's portion of the home in bankruptcy also. I should repeat this but get some guidance on this area of Bankruptcy because it is very tricky and every case is different.

If you need to learn more about what to do, where to turn and what questions to ask about Bankruptcy, then feel free to contact Bankruptcy Australia on 1300 795 575, or visit our website: www.bankruptcy-australia.net.au