Frequently Asked Questions?
You can become bankrupt voluntarily or you can become bankrupt on the actions of a creditor. If you have considered the alternatives and have decided that voluntary bankruptcy is your best option you will need to complete a Debtor’s Petition and Statement of Affairs. This is a service that we offer. Contact us for further help (Ph 1300 900 194).
You will need the name, address, and amount owed to each of your creditors. You must show all debts for which you are personally liable, whether business or personal. There are severe penalties including imprisonment for failure to disclose property or concealment or unlawful disposal of property or any item of value. You will need full details of your income, personal property which includes such things as house, car, bank accounts, shares, and any money owed to you.
When the forms are accepted by the Official Receiver in Bankruptcy you become bankrupt
No. You can become bankrupt voluntarily owing any amount. A creditor cannot make you bankrupt unless the debt is $5,000 or more.
Bankruptcy does not affect the rights of a creditor to claim under a guarantee. The creditor is entitled to recover payment from the guarantor. Once payment has been made, the guarantor steps in the shoes of the creditor and is able to lodge a claim in your bankruptcy for the debt paid.
Generally, yes. They will still have a liability for the total amount outstanding on all debts incurred in joint names.
Bankruptcy generally does not prevent you from working. However, if you are engaged in particular trades or professions there may be certain restrictions imposed by professional associations or licensing authorities. You should contact your professional association or licensing authority to confirm whether there is any effect on your membership or ability to practice a particular trade.
Your employer is not normally notified of your bankruptcy unless you owe him/her money or unless you have failed to pay compulsory contributions. It is still your responsibility to lodge taxation returns for any income earned during the period of your bankruptcy.
One effect of bankruptcy is to take the pressure off you to make payments to most of your creditors. If you earn an income you are obliged to make regular payments or contributions to the trustee for the benefit of creditors (contact us for current income threshold amounts).
By law contributions are enforceable if your income is in excess of a statutory amount and may be directly deducted from your income if payments are not made. It is an offence for an employer to dismiss a bankrupt because the trustee has issued the employer with a notice to forward payment from the bankrupt’s wages.
In order to assess the contribution payable, a bankrupt’s income is broadly defined to include money received from their employer and any other benefit, for example the private use of a motor vehicle or subsidised housing. Other factors are then considered and include the amount of income tax payable, maintenance payable, and the number of your dependants.
Once you become bankrupt, a vehicle which is used primarily as a means of transport (eg. car or motor bike), is protected and can be retained by you where your interest in the vehicle is less than the prescribed amount ($8,000.00).
Where the interest in the vehicle is valued at more than the prescribed amount, the trustee is required to sell, and give back to you the value of the prescribed amount and retain the balance for the benefit of your creditors. If the vehicle is jointly owned by two bankrupts the relevant value is double the prescribed amount.
Should you terminate your employment during the period of your bankruptcy any lump sum termination payments due to you will be claimed by your trustee.
Your discharge from bankruptcy does not return those assets to you. The trustee may sell such assets after the date of your discharge.
Generally no, however your trustee may choose to do so.
People who voluntarily go bankrupt and don’t provide false information are extremely unlikely to have to appear in court.
Yes. The most important are listed below:-
The penalties for these offences vary from 6 months to 3 years imprisonment upon conviction.
If you have an existing ABN when you become bankrupt, the trustee will advise the Deputy Commissioner of Taxation of your bankruptcy. The Tax Office will note the date of your bankruptcy against the ABN. If you wish to continue to use the ABN you will need to contact the Tax Office and arrange to have your ABN reactivated. Regardless of Bankruptcy you will still be responsible for lodging your BAS Statement.
There is no restriction on applying for an ABN after becoming a bankrupt.
If the tax office is a creditor of your bankruptcy, any refund you are entitled to during the period of bankruptcy may be retained by the tax office to offset the amount owing. Tax refunds attributable to income earned by you prior to the date of your bankruptcy (irrespective of when it is received by you) is an asset that vests in your bankrupt estate and can be claimed by the trustee.
Tax refunds attributable to income earned during your bankruptcy will be treated as income for income assessment purposes. After discharge, any debt still outstanding to the tax office which formed part of the bankruptcy cannot be recovered by the tax office. Tax refunds after discharge may be retained by you. Regardless of bankruptcy you are still responsible for lodging your Income Tax Returns.
The trustee has the power to void transactions made within a period of 5 years prior to the bankruptcy. The trustee will investigate the transfer and may recover the asset if the transfer was to defeat creditors or if the consideration for the transfer was less than the market value or if it was in preference to other creditors. Disposing or transferring property prior bankruptcy with intent to defeat your creditors is an offence under the Bankruptcy Act.