Consequences of bankruptcy

What are the Consequences of Bankruptcy?

There are significant consequences in becoming bankrupt in Australia and it is important that you consider those consequences in deciding whether to become a bankrupt. We have included a video and some general information below about the consequences of bankruptcy. If you would like advice on the repercussions of going bankrupt, please send us an enquiry.

Video credit and copyright: AFSA

When a person becomes bankrupt in Australia, a person named a ‘trustee in bankruptcy’ will be appointed over your assets which is then called your ‘bankrupt estate’. It is important that you have a strong relationship with your trustee in bankruptcy as both them, and you, will have obligations to fulfil during the period of bankruptcy.
When you become bankrupt, most of your debts will be handled by your trustee in bankruptcy. The obligations of the trustee include reviewing your financial position and considering the manner in-which to dispense with your bankrupt estate to meet your creditors’ demands. This may mean that the trustee has control over the use of your personal bank accounts and may cause your home to be placed on the market.
The trustee in bankruptcy has rights to request and obtain documents and information from you in performing their obligations. It is important for you to understand what requests they are entitled to make and what your obligations are in meeting those requests.
If the trustee in bankruptcy is able to obtain enough funds to discharge all of you creditors’ debts, this may mean that you can have your bankruptcy annulled. If the trustee is unable to pay your creditors in full, it is likely you will remain bankrupt for the full 3 years and 1 day. You won’t have to pay your creditors in bankruptcy once your bankruptcy has ended.
The trustee may also be able to negotiate an arrangement on behalf of your bankrupt estate and with the creditors in bankruptcy. This may also enable you to end your bankruptcy early.
While the trustee will manage your bankrupt estate in meeting your creditors’ demands, you may find that other debts that you had prior to bankruptcy continue to be payable by you. Types of debts that bankruptcy doesn’t cover include child support payments and court ordered fines.
You can continue to work while you are bankrupt. If you earn over a certain amount, then anything over the limit will be payable by you to your creditors in bankruptcy. Some professions will now allow you continue to work in the industry if you are bankrupt. We can make enquiries regarding this on your behalf with professional bodies.
You will be restricted in overseas travel. If you are bankrupt and wish to travel overseas, you will need to obtain permission from the trustee in bankruptcy to do so. The trustee may request information from you in deciding whether to grant you permission.
Your name will permanently appear on the National Personal Insolvency Index (NPII) which is a public register listing records of insolvent individuals in Australia.
If you have any legal claim to make or you had a legal claim on foot at the time you became a bankrupt, it is likely that your rights to make a claim, or to continue to pursue your claim, get assigned to the trustee in bankruptcy.
If you are considering voluntary bankruptcy, you may consider building a relationship with an insolvency practitioner beforehand as having a good relationship with your trustee in bankruptcy may increase your chances of ending your bankruptcy early or ensuring the bankruptcy process goes as smoothly as possible.
Different trustees have different levels of experience and, of course, personalities. The trustee in bankruptcy is entitled to be reimbursed from your assets in bankruptcy when administering your bankrupt estate. Selecting a specialised trustee may reduce their costs and lead to a positive monetary balance in your bankrupt estate.
We have established relationships with insolvency practitioners (trustees in bankruptcy) in Perth, Western Australia. If you would like to know more about bankruptcy or how we can assist you, enquire now. Otherwise, continue reading our website to see if you can find an answer to your enquiry.

+61 (0)4 9216 1121

PO BOX 26, Beechboro, Perth, Western Australia 6063