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Bankruptcy

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:

  • all unsecured debt is instantly, legally written off
  • 99% of people will make no ongoing payments
  • lasts for 3 years
  • creditors are no longer able to contact you or pursue any legal action
  • your superannuation is protected.

New Leaf can complete the necessary legal documents.

How long does bankruptcy last?

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).

What debts are cleared by bankruptcy?

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

How much can I earn while 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 November 08, 2017):

  • No dependants: $1,073.80 per week after tax
  • One dependant: $1,267.08 per week after tax
  • Two dependants: $1,363.72 per week after tax
  • Three dependants: $1,417.41 per week after tax
  • Four dependants: $1,438.89 per week after tax
  • More than four dependants: $1,460.36 per week after tax.

Example of bankruptcy income threshold

You have no dependants and earn $1,076.28 per week.

$1,083.80 – $1,073.80 (income threshold) = $10

50% of $10 = $5

Income contribution per week = $5

You will be required to pay this weekly for 3 years.

How do I file for bankruptcy?

This is the process New Leaf follows to help clients who believe bankruptcy is the right solution for them.

  • We assess your financial situation.
  • You formally engage us to act on your behalf.
  • We deal with your creditors on your behalf.
  • We prepare and lodges your bankruptcy documents.
  • Once your bankruptcy has been processed, your creditors are notified and must cease all collection activity and contact with you.

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.

Find out more

Bankruptcy is one option in a range of debt solutions. For an overview of 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 08/11/2017

 

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