By Liyan Tay & Dean Nicolaides
The purpose of bankruptcy is to allow a fair and equitable distribution of the debtor’s property amongst creditors in accordance with the bankruptcy legislation and to allow the debtor in hardship to obtain relief from creditors and be afforded an opportunity to rehabilitate their financial position.
Below are some of the most commonly asked questions for debtors considering bankruptcy as the next step to resolve their financial affairs.
How does bankruptcy affect my employment?
The Bankruptcy Act 1966 does not impose any restrictions on one’s ability to earn an income in any trade or profession.
Are there any implications on licenses or professional memberships?
Yes there are. Certain professional memberships or licencing bodies may impose restrictions on bankrupts. For example, bankrupts are not permitted to hold building licenses, property management licenses, liquor licences or financial brokerage licences.
Licences may also be cancelled if a bankrupt is a real estate agent, conveyancer, registered manager, sales person, strata management agent or property valuer.
However, there are some professions which allows a bankrupt to continue operating under some restrictions, such as legal practice certificates and contracting licences.
If one is considering bankruptcy as an option, it would be prudent to contact the relevant association or licencing authority to make further enquiries on how bankruptcy could impact them.
Can I be a company director or a Trustee whilst being bankrupt?
A bankrupt cannot hold a position as a company director. Most trust deeds also have clauses preventing a bankrupt from acting as Trustee of a trust but each trust deed should be closely examined.
Do I have to make contributions to the bankruptcy Trustee if I am employed?
This depends on the income level (indexed). If a bankrupt’s annual income exceeds a certain threshold amount then they would be liable to make compulsory income contributions towards their bankrupt estate.
For example, if a bankrupt has no dependents, the bankrupt can earn up to $55,837.60 (net of tax) before any income contribution would be payable. If the threshold is exceeded then the bankrupt would have to contribute 50% of the difference between the actual income less the applicable threshold amount.
Can I travel overseas whilst being bankrupt?
Yes, a bankrupt may travel overseas after receiving a written consent from the Trustee. However certain conditions may be placed upon the bankrupt depending on their circumstances.
What assets am I allowed to keep during bankruptcy?
A bankrupt is entitled to retain certain exempt assets, some of these are:
- personal effects and household property.
- assets or cash held in trust.
- tools of trade up to $3,700 (indexed).
- vehicle used as a primary means of transport with equity up to $7,800 (indexed).
- life insurance policies, superannuation policies and approved deposit funds fund.
- Items of sentimental value.
Can my creditors still pursue me in bankruptcy?
Creditors cannot take any further action against a bankrupt to recover their pre-bankruptcy debts. There are some debts which are not covered in bankruptcy such as child support and maintenance, court imposed fines and penalties, government student loans, debts incurred after bankruptcy and unliquidated debts.
An Important Message
While every effort has been made to provide valuable, useful information in this publication, this firm and any related suppliers or associated companies accept no responsibility or any form of liability from reliance upon or use of its contents. Any suggestions should be considered carefully within your own particular circumstances, as they are intended as general information only.