What is Bankruptcy?
Bankruptcy is the process where a person who cannot pay their creditors gives up their assets and control of their finances in return for no legal action from the creditors.
You may declare a bankruptcy, or a person who you owe money to can declare you bankrupt. This person is called your creditor and the request for bankruptcy is called a creditors petition.
A bankruptcy hearing is heard by the Federal Magistrates. The court will decide if you have committed and act of bankruptcy, which most commonly is if you have not followed the instructions in the bankruptcy notice. The main instruction would be that you pay the amount specified in the bankruptcy notice in the specified time.
The Implications Of Bankruptcy In Australia
If you are a declared bankrupt you cannot hold or grow assets while in bankruptcy. You may:
- Own a car of $7350 equity
- Own general household assets.
- All bank accounts are seized and fund become the trustees estate at the bankruptcy date.
- Proceeds of a deceased estate become the trustees. You have no right to the inheritance.
- you may have tools of trade to the value of $3500.
- You may earn $54523 per year as a single person. Income is indexed as your number of dependents increases
- A bankruptcy stays on your credit file for 7 years.
Most people do their best to avoid bankruptcy as it is very limiting on your lifestyle for years to come. If you are concerned about the implications of bankruptcy, and would like to try and avoid them, contact us today.