16 May The Benefits of Bankruptcy
Bankruptcy is a legal process that allows individuals to be released from most debts. Throughout the bankruptcy process, a Trustee will take stock of your assets, and they may sell some of those assets to repay creditors. At the end of the bankruptcy period, most of your debts are released and you are free to start life afresh. If you are facing serious financial difficulties, bankruptcy is a common way of satisfying creditors, and it provides several key benefits. In this article we will explore bankruptcy and how it can help you manage issues of debt and insolvency.
The Benefits of Bankruptcy
If your application for bankruptcy is successful, the proceedings will be looked after by an independent trustee. The trustee will assess your income, assets, debts and other commitments, and develop a plan that achieves the best outcome for everyone involved.
For those facing financial struggles, bankruptcy offers a few major benefits:
- Most unsecured debts are forgiven, excluding debts such as court fines, child support and HECS/HELP debts.
- You retain some of your property to help start fresh. A bankrupt is allowed to keep necessary household items, their primary vehicle (where certain criteria are met) and goods like their personal computer and phone.
- Creditors cannot pursue you once you enter into bankruptcy. All communication from creditors will go through your trustee.
- Bankruptcy helps provide relief from ongoing payments that were previously being made to creditors.
In addition to the financial upside of bankruptcy, a report from Melbourne University also showed there were significant personal benefits. Respondents to the study reported better physical and mental health, as well as improvements in their relationships and general quality of life.
The Impacts of Bankruptcy
Filing for bankruptcy will have a major impact on your life. While it will help you find relief from creditors, it also comes with enduring effects that need to be weighed carefully:
- Bankruptcy can affect future credit applications. For credit applications over a set amount, you will be required to inform your bankruptcy trustee.
- Your trustee may sell your assets, including property like houses and cars. You will be allowed to keep ordinary household goods, tools used to earn an income and vehicles up to set value.
- You will need your trustee’s permission to travel overseas.
- If you earn over a certain amount, you may be required to make payments to your trustee. Bankruptcy can also restrict your employment or ability to run a business.
- Your details will be recorded on the National Personal Insolvency Index (NPII). Your name, date of birth and address will be permanently recorded on the NPII, a publicly searchable database of Australian insolvency proceedings.
In some cases – such as where your safety is at risk – you may apply to have your address hidden from the NPII. Your name and date of birth cannot be hidden or removed.
Who is Eligible for Bankruptcy?
In Australia, individuals must meet two criteria to be eligible to apply for bankruptcy. You must be:
- Unable to pay your debts when they are due (also known as personal insolvency), and;
- Present in Australia, or have a business or residential connection to Australia (such as maintaining an Australian address).
There is no minimum or maximum amount of debt or income to be eligible for bankruptcy. If you hold a Debt Agreement under Part IX of the Bankruptcy Act 1966, you will need to contact your administrator before applying for bankruptcy. Your Debt Agreement needs to be terminated before applying.
Contact SV Partners Today to Find Out More About the Bankruptcy Process
Bankruptcy is an important insolvency tool that allows individuals to find relief from excessive debt. Although it comes with lasting consequences, bankruptcy also offers significant benefits in the right situations. If you are considering applying for bankruptcy then you need to seek professional advice. The experienced team at SV Partners are experienced bankruptcy trustees and can walk you through all of your available options, including other insolvency solutions. We will work with you to determine whether bankruptcy is the best solution for your situation and provide all the support you need to navigate the process. For a confidential discussion, contact us on 1800 246 801 or get in touch with us online.