Personal Frequently Asked Questions

Consequences Of Bankruptcy

  • What are the consequences of bankruptcy?

    There are many consequences to bankruptcy. The best source of information on the consequences of bankruptcy is: https://www.afsa.gov.au/insolvency/i-cant-pay-my-debts/what-are-consequences-bankruptcy

  • Does Bankruptcy release you from all debts

    Most unsecured debts are covered in bankruptcy - this means you no longer have to repay these debts. There are some exceptions such as fines.

  • Does Bankruptcy affect my ability to obtain future credit

    If you apply for credit over a set amount, you must inform the credit provider of your bankruptcy. For the current amounts, please see https://www.afsa.gov.au/insolvency/how-we-can-help/indexed-amounts-0

  • Do I lose the right to take or continue legal action

    If you're involved in any legal action, you need to inform your trustee.

  • How long does Bankruptcy last?

    Bankruptcy normally lasts for 3 years and 1 day from the day you file your statement of affairs. In some cases, your trustee can lodge an objection to extend the bankruptcy for up to eight years.

  • What happens to my debts after bankruptcy?

    After bankruptcy you are discharged from all provable debts.

  • What happens to my credit rating?

    Of all the bankruptcy frequently asked questions this is the most common query. Defaults are listed for 5 years on a commercial credit reference record, however, bankruptcy and other serious credit infringements are recorded for 5 years. Your name will be listed for 5 years from the commencement of your bankruptcy even if your bankruptcy has been discharged. Lenders may limit your ability to borrow money or buy things on credit and you may find it hard to rent or get electricity, water or the telephone connected, without paying a bond.
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Income

  • How will Bankruptcy affect your income, employment and business

    If you earn over a set amount, you may need to make compulsory payments to your trustee. The best source of information is: https://www.afsa.gov.au/insolvency/i-am-currently-bankrupt

  • I'm receiving a redundancy payment, can I keep it?

    Redundancy and leave payments you receive:
    • prior to entering bankruptcy - are an asset the trustee can claim
    • after entering bankruptcy - form part of your assessable income
    You need to inform your trustee if you receive these types of payments.

  • What about gifts and prizes?

    If you receive money during your bankruptcy, you need to inform your trustee. This includes gifts from friends or family and prizes, such as winning a lottery. Your trustee can claim money you receive as an asset.

  • What do I do if my income or employment has changed (or may change)?

    You must notify your Trustee immediately. For example, if you:
    • change jobs
    • receive higher or lower income (including government assistance)
    • stop working.
    There is no limit to the amount of income you can earn while you're bankrupt. There is also no limit to the amount you can save during your bankruptcy. However, if your after-tax income goes above a set amount, you may need to make compulsory payments. This amount changes with how many dependants you have.

  • Why did I receive a letter asking about my income?

    During bankruptcy, your trustee may request financial information from you. This could include details of your:
    • income
    • employment
    • bank accounts
    • dependants
    • value of assets.
    It is your obligation to provide this information. This applies even if:
    • your income hasn't changed
    • you are unemployed
    • you receive a pension or government assistance
    • you are self-employed
    • your bankruptcy is ending soon or has already ended.
    If you don't provide this information in a timely way, you could face penalties. We use this information to assess your assets and income to determine if you need to make compulsory payments. We then notify you of the outcome.

  • Can I have an extension to return my statement of income?

    No, we are unable to extend the return date. If you don't provide this information in a timely way, you could face penalties. If you are waiting for supporting documents, you should still return your form by the due date. Include an explanation as to what documents are outstanding and forward them when you receive them. Remember to include your name and administration number.

  • What do I do if I need some assistance with my statement of income?

    Please contact your Trustee’s office for assistance.

  • What do I do if I have lost my statement of income?

    If you have misplaced your statement of income, please let us know and we will send you a new one.
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Overseas Travel

  • Does Bankruptcy affect your ability to travel overseas

    You must request permission from your trustee to travel overseas. It's an offence to travel overseas without consent in writing. Your trustee may ask for further details to consider your request. The best source of information is https://www.afsa.gov.au/insolvency/i-am-currently-bankrupt

  • Can I travel overseas during bankruptcy?

    During bankruptcy you must request permission from your trustee to leave Australia. Please contact your Trustee directly.

  • What if I need to travel for work purposes?

    If you need to travel overseas for work, you still need to request permission.
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What About My Assets?

  • What happens to my belongings?

    When you become bankrupt, there are some consequences which may affect your personal belongings. Your trustee has rights to take control of and sell some of your assets. During bankruptcy, you’re not allowed to deal with assets that now belong to your trustee. Bankruptcy allows you to keep most ordinary household items of reasonable value, such as your:
    • furniture
    • tv & computer
    • appliances.
    You can also keep other items if they are below a set amount, such as your:
    • car; and
    • tools you use to earn a living.
    If you have any questions about your belongings, talk to your trustee. Your trustee can investigate and ask you for more information. It is your obligation to assist your trustee with this information. There are penalties for failure to reveal your assets, whether owned before or during bankruptcy. These penalties can include extending your bankruptcy period for up to 8 years.

  • What can be taken or sold in bankruptcy?

    During bankruptcy, your trustee may be able to claim, and sell, some of your possessions (assets). Your trustee can use proceeds from the sale of your assets to repay money you owe to creditors. Assets may include, but are not limited to, real estate, vehicles, bank balances, tools, lottery winnings. You must declare any assets you have when you apply for, and any you receive during, bankruptcy. There are penalties for not disclosing information to your trustee. Below is information about what your trustee can and cannot claim.

    Your vehicle You can keep a vehicle/s you use mainly for transport up to a set amount. Once the value of your vehicle/s exceeds this amount your trustee may claim them. Amounts can be found at https://www.afsa.gov.au/insolvency/how-we-can-help/indexed-amounts-0

    Your house and property you own Your trustee can claim any house/s or property you own as an asset.

    >Money you receive during bankruptcy This is money that doesn't form part of your ordinary income. It can include superannuation, inheritance money, gifts of money and compensation payments. Certain types of payments may be protected meaning the trustee can't claim them. Any prizes or lottery winnings you receive during bankruptcy are an asset that your trustee can claim. If you purchase assets (e.g. a house) using protected money, your trustee may not be able to claim this. For example, if you use 100% protected money to purchase the house, your trustee is unable to claim this. If you purchase a house using only a portion of protected money (e.g. 20%), the trustee may seek to claim 80% of the house. The trustee would then refund you the protected portion (e.g. 20%).

    Tools of trade These are tools you use to earn a living. You can keep these tools as long as the value is below a set amount. To work out their value, use the current market value (what you'd get if you sold them today). Not the price you paid for them. If they are above the set amount your trustee is able to sell them to help pay your debts. Amounts can be found at https://www.afsa.gov.au/insolvency/how-we-can-help/indexed-amounts-0

  • Why is my bank account is frozen?

    It is normal on day one for your Trustee to contact all major banks and request freezes be put on accounts. Contact your Trustee in this regard.

  • What if I receive money during my bankruptcy?

    Apart from your ordinary income, other money and payments you receive may:
    • still form part of your income assessment; or
    • be an asset your trustee can claim and sell.
    If you receive a payment and you're unsure if it falls into the above categories, check with your trustee.

  • Can I keep my tax refund?

    If you receive a refund, you shouldn't spend it before confirming with your trustee whether you can keep it.

  • I'm getting an inheritance, can I keep it?

    Normally no. If you receive an inheritance, you need to inform your trustee.

  • Will bankruptcy affect my partner’s assets?

    It may affect your partner's assets if:
    • They jointly own an asset with you - A joint asset is an asset owned by more than one person. Your trustee will have an interest in your share of the asset e.g. if you have a bank account in joint names, the trustee can claim your half of the balance.
    • They are entering into bankruptcy - The trustee would have an interest in the full amount of any joint assets.
    • They are in possession of an asset owned by you - Including money, real estate, motor vehicles and other property.
    • They own assets that you contributed towards or helped purchase - This includes assets not registered in your name - e.g. a house or car.
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Obligations of a Bankrupt

  • What are my obligations?

    Once bankrupt you will no longer need to pay most of your debts. Now you can work on your future. During bankruptcy you have certain obligations and may face some restrictions. It is your obligation to tell your trustee when your circumstances change. You must inform your trustee if you:

    • change your name, address, income or employment
    • forgot to include debts or assets in your bankruptcy application
    • buy or gain new assets (e.g. house, car, winnings)
    • receive an inheritance (could be money or other assets).

    You also have the following responsibilities. You must:

    • request permission from your trustee to travel overseas
    • reveal your bankruptcy if you apply for credit over a set amount
    • disclose your bankruptcy if you trade under a business name that doesn’t contain your name
    • provide information to your trustee regarding your finances (such as income and mortgage statements)
    • lodge your statement of affairs within 14 days (of notification of bankruptcy) if you've been made bankrupt by a creditor.

    There may be penalties if you don't comply with the above obligations and restrictions. In some cases, your trustee may extend your bankruptcy.

  • What do I do if my personal details have changed?

    During bankruptcy, you must stay in contact with your trustee and inform them when your circumstances change. You must tell your trustee if you change your:

    • Name (you need to provide evidence)
    • Address (residential or postal)
    • Phone number
    • Email address
    • Employment or income
    • Number of dependants

  • What do I do about a creditor who is still contacting me about a debt?

    1. Tell them you’re bankrupt and provide your administration number and start date.
    2. Ask if the creditor has sold to a debt collection agency (if so, inform your trustee).
    3. Check if the creditor is referring to the same debt that's listed in your bankruptcy.
    4. Refer the creditor to your trustee to confirm your bankruptcy.
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Objections To Discharge

  • What Is an Objection to Discharge?

    Objections to discharge may extend your bankruptcy. Possible reasons for an Objection to Discharge include if the bankrupt:

    • Makes a void transfer against the trustee because of Section 120/122 of the Bankruptcy Act 1966 (under valued transactions and preference payments)
    • Continues to manage a corporation
    • Engages in misleading conduct and amount exceeds the current limits.
    • Fails to disclose to the trustee, a liability that existed at the date of bankruptcy
    • Fails to notify a change of address or daytime telephone number
    • Fails to advise the trustee of any material change to the information disclosed on their statement of affairs
    • Fails to attend a creditors’ meeting without written approval from the trustee
    • Fails to attend an interview or examination
    • Fails to disclose any beneficial interest in any property
    • Leaves Australia without permission
    • Fails to provide details of property and income when requested
    • After the date of bankruptcy, the bankrupt deliberately provided false or misleading information to the trustee
    • Fails to disclose detail of income or expected income
    • Fails to pay contributions as assessed
    • Fails to adequately explain how money was spent or assets were disposed of
    • Fails to disclose to the trustee, a liability that existed at the date of bankruptcy
    • Fails or refuses to sign a document when required
    • Intentionally fails to disclose to the trustee, a beneficial interest in a property
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Affect On Creditors

  • What debts are not covered by bankruptcy?

    Very important exceptions are fines for breaches of the law, debts arising from fraud, maintenance payments and Child Support. Debts due to the Department of Social Security (Centrelink) may or may not be covered by bankruptcy and should be confirmed with Centrelink. Bankruptcy does not protect you from payment of these debts, and you are still liable for these. The other exceptions are secured creditors (details above), accumulated HECS (Higher Education Contribution Scheme) debts which had been raised before your bankruptcy and Student Supplement Loans – Ask the Australian Tax Office if you need more information. If you have unpaid accounts relating to housing or essential services such as electricity, telephone or gas the supplier may require payment of the account or a bond for the service to be maintained.

  • What happens if someone has guaranteed some of my debts?

    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.

  • Someone else also signed the loan agreement. Will they have to pay if I declare myself bankrupt?

    Generally, yes. They will still have a liability for the total amount outstanding on all debts incurred in joint names.

  • What about debts incurred after bankruptcy?

    If you become bankrupt you will be responsible for any debts incurred by you after bankruptcy.

  • Can I continue to use my credit card after bankruptcy?

    It is a matter for the issuing bank or finance company as to whether they are prepared to continue to extend credit to you. All creditors at the date of bankruptcy should be listed on your Statement of Affairs and they will be notified of your bankruptcy. It is an offence for you to incur credit over a set limit without disclosing to the person you are dealing with that you are an undischarged bankrupt.

  • When are the creditors notified of my bankruptcy?

    The creditors are notified in writing as soon as possible by the trustee and informed of the assets and liabilities disclosed by you on your statement of affairs.
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Offences Under Bankruptcy

  • Are there offences under bankruptcy?

    Yes. The most important are listed below:

    • Disposing of property before bankruptcy with intent to defeat your creditors.
    • Failure to disclose assets.
    • The deliberate obtaining of credit when you know you cannot pay
    • Gambling and speculation which results in bankruptcy
    • Incurring debts during bankruptcy for over a set limit without disclosing that you are bankrupt.
    • Operating a business under an assumed name, without advising your bankruptcy
    • Leaving Australia without the trustee’s permission

    The penalties for these offences vary from 6 months to 3 years imprisonment upon conviction.

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Other

  • What if I have transferred my house or another asset of value to my spouse prior to bankruptcy?

    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.

  • I have been served with a summons to attend court for an oral examination. Do I still have to attend now that I am bankrupt?

    Yes. It is recommended that you still attend the court on the day and advise them of your bankruptcy.

  • Can I save money?

    You can save during bankruptcy.

  • Will bankruptcy affect my family tax benefits?

    No, they don't form part of your income assessment for compulsory payments.

  • Can I apply for Centrelink?

    Yes. Contact Centrelink directly to confirm your eligibility.

  • Is my spouse's income affected?

    The trustee can only use your income to assess whether you need to make compulsory payments.
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