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

When it comes to Bankruptcy Australia, usually people aren't aware that there are both voluntary, and involuntary bankruptcy - both of these have unique methods and guidelines.

Involuntary bankruptcy arises when a person you owe money to involves the court to declare you bankrupt. Commonly when you get one of these notices, you have normally 21 days to pay all the debt. If you do not, then the creditor goes back to the court and asks 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 shortly after the 21 days have expired and put your case forward, to stop it going to the next level. Apart from 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 managed to in the 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 more than likely to be made bankrupt by someone, get some tips 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 someone else bankrupt you. Once you are bankrupt, it's typically far too late.

Voluntary Bankruptcy

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

This question is not the same for everybody of course, but commonly I find that one way you could work it out is to figure out just how long it will take you to pay every one 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 rate she was paying off her account, and it was 35 years! Imagine 35 years for one credit card bill.

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

In many ways, the ease with which companies/credit providers can default your credit file is wrong. The punishment doesn't seem to equate to the crime in my book. So if you currently 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 wiped off completely.

So if your credit rating is a big factor 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 difference is that with a DA or PIA you repay the money and still have it on your file for 7 years.

Bankruptcy

I have talked about the word a few times now, but when it comes down to it, Bankruptcy is the biggest part, and the element more people are afraid of when they come to me to talk about 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. As compared to countries like the United States, our bankruptcy laws are very generous.

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 finds that 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 costs the taxpayer anyway.

Bankruptcy wipes every one of your debts including ATO debts except for 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 a lot more that can be said about doing this and Bankruptcy in general but the objective of this blog was to help you decide between a few possible options. When getting some advice, remember that there are always possibilities when it relates to Bankruptcy in Australia, so do some research, and Good luck!

If you wish to learn more about precisely what to do, where to turn and what questions to ask about Bankruptcy, then feel free to check with Bankruptcy Experts Australia on 1300 795 575, or visit our website:bankruptcyexperts.com.au

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

Bankruptcy Australia is a complicated process, and you should be sure you get the right insight. And when it comes to your income being affected, the answer to the question is maybe. The very first thing you have to know about going bankrupt is there is no constraint on how much you can earn. However, I will say that your income is a serious consideration when working through when it comes to Bankruptcy.

The very first thing you need to understand about this area of Bankruptcy is just how much 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 quantity 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 your job, or a circumstance where your partner used to work but is not able to support the family income.

Some of the useful parts of Bankruptcy is that your employer will not be told when you file for bankruptcy. Also, Child support is always taken into consideration in bankruptcy, if you receive child support that is not factored in as income. If you pay child support this will be also thought about, for example if you pay $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 much more issues covering income and what is or isn't thought of as income - if you're unsure, it's recommended to get experienced advice. The reason you will need to consider your income as a part of the Big 5 questions here is that bankruptcy is in some situations not an economically sensible option.

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

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

If you intend to find out more about what to do, where to turn and what questions to ask about Bankruptcy, then don't hesitate to contact Bankruptcy Experts Australia on 1300 795 575, or explore our website: www.bankruptcyexperts.com.au