Bankruptcy is not designed as a punishment. It is more like a financial ‘reset’ button.
However, bankruptcy has serious consequences and should only be considered as a last resort.
The Bankruptcy Act was introduced in 1966 to help Australians who, through no fault of their own, find themselves in a position where they will never be able to repay their debts.
If you are in a situation like this and you cannot arrange a debt agreement, bankruptcy may be a solution.
The key features of bankruptcy include:
New Leaf can complete the necessary legal documents.
Bankruptcy is broken up into two periods: the ‘undischarged bankruptcy’ period that lasts for three years, during which time the restrictions imposed by the Bankruptcy Act apply. The second period is called ‘discharged bankruptcy’, which lasts for a further two years where no restrictions apply.
All bankruptcies are recorded permanently on a historic government database called the National Personal Insolvency Index (NPII).
Most debts can potentially be cleared by bankruptcy. All unsecured debts (credit cards, personal loans, tax bills) can be cleared by bankruptcy. However child support, HECS/HELP and fines cannot be included in bankruptcy
Bankruptcy isn’t a punishment. However, it is reasonable that creditors should get some money if the person filing for bankruptcy is a high-income earner. During the ‘undischarged bankruptcy’ period (three years), you’ll be asked to make ‘bankruptcy income contributions’. Above a certain threshold, 50% of your after-tax wage goes to your creditors.
These are the present bankruptcy income thresholds (correct as of October 28, 2016):
Example of bankruptcy income threshold
You have no dependants and earn $1,076.28 per week.
$1,076.28 – $1,066.28 (income threshold) = $10
50% of $10 = $5
Income contribution per week = $5
You will be required to pay this weekly for 3 years.
This is the process New Leaf follows to help clients who believe bankruptcy is the right solution for them.
The legislation surrounding bankruptcy is complicated. However, our consultants would be happy to answer any queries. Remember, bankruptcy should be considered only as a last resort.
Bankruptcy is one option in a range of debt solutions. For an overview on the options available, take a look here. You must determine whether the information is appropriate in terms of your particular circumstances.
Want to talk about bankruptcy or other solutions? Talk to us, and we’ll talk you through your options. We’re experts in finding the right different debt solutions for people who are experiencing difficulty with their debts.
Please be aware that any figures on this website may change slightly from time to time. They were correct at the time of uploading. Updated 17/08/2017