Are you struggling with your personal or business debts?
Are your personal or business debts out of control? Have you been thinking about going bankrupt for a while now but have some nagging concern about it?. Maybe the thought of bankruptcy has crossed your mind at some stage but you have been too afraid to take the next and most difficult step – finding out whether or not bankruptcy is right for you. We know that just the thought of bankruptcy is scary enough without having it become a reality. We understand that there is an overwhelming sense of failure in this process. Its more than likely you feel trapped like you have no other option. That’s where the team at Bankruptcy Australia can help you right now.
You can be 100% debt free!
Making the big decision to go bankrupt can be a little less painful if you sit down and add up all the debt you have and then work out how long it is going to take you to pay it all off, and if the answer is longer than 3 years then bankruptcy might be right for you. We can help you build a future free from blocked phone calls and one where you can look forward to getting the mail again. However there are a few things you need to know before you make that very difficult decision to declare bankruptcy. We call these few things the “Big 5” or in other words the big 5 questions you must get the answer to before you file for bankruptcy. Remember the golden rule in all insolvency in Australia the sooner you act the more options you will have.
The “Big 5” Questions you must answer before you go bankrupt!
There are 5 crucial questions you must have an answer to before you declare bankruptcy. If you want to know what they are feel free to download the free E-book on the right hand side of this page. It will answer these critical questions in great detail to help give you peace of mind, and that you are making the right decision. Simply fill in the form to the right with your name email and phone number and we will email you a copy of the book right away, we won’t put you on our database and email for the next 5 years. All we may do is call you to see if we can help you with any particular question you may have and that’s it!
Is bankruptcy my only option?
No! There may be several options available to you depending on your situation. Below is a chart outlining all of the pros and cons of various debt solutions. This chart is by no means comprehensive but it will allow you to make an informed decision.
What is a Personal Insolvency Agreement?
This is flexible financial agreement between you and your creditors (the people you owe money too). A trustee administers when you need to pay and how much etc. When those conditions have been met you are can begin with a fresh start. Wouldn’t it be wonderful if you creditors agreed to settle your debts for 1 cent in the dollar, unfortunately these days it more like 70 cents in the dollar.
Pros – Personal Insolvency Agreements
- Avoid bankruptcy
- Possibly limit liability to make income contributions
- You pay back 50 to 70 cents in the dollar to your creditors
- It can be a very a quick process
- You may get to keep important assets
- The debtors assets are independently controlled
- Lower legal costs associated with court proceedings
Cons – Personal Insolvency Agreements
- You are not free until you have paid the debt
- It still affects your credit rating for 7 years, the same as bankruptcy
- You cannot be a company director until the debt is settled
- You are required to meet with your creditor face to face
- Your details will be published in the local paper
It may take many years to settle the debt
What is a Debt Agreement?
This is similar to a personal insolvency agreement where you still have to pay back the debt. A debtor can enter into a legal arrangement with their creditors over payment arrangement without being declared bankrupt.
Can I enter into a Debt Agreement?
Yes you can however you need to show you have sufficient income to re-pay the debt, much like applying for a loan. If you are bound by an existing Debt Agreement, or have been bankrupt, you cannot enter into a Debt Agreement. There are also income restrictions, property value and unsecured debt value restrictions. If you want to know more please call us on 1300 795 575. The biggest and most obvious downside to these you have all negatives of bankruptcy but you still have to pay back the debt, in spite of the slick television commercial think carefully about this as an option in most cases its not a solution its just moving the problem from a handful of creditors to once creditor, and you are no better off. There are certain circumstance when will would advise you to enter into one of these but to be sure give us a call first on 1300 795 575.
Pros – Debt Agreement
- Avoid Bankruptcy
- Stops creditors – cannot take any further actions to recover their debts
- You may get to keep important assets
Cons – Debt Agreement
- There is an upfront charge
- If you don’t make your payments the agreement may be cancelled, and then the creditors can resume collection of their debts
- The debtor details will appear on the National Personal Insolvency database Index (NPII) from the date that the debt agreement proposal was accepted by AFSA.
- It still affects your credit rating for 7 years, the same as bankruptcy.
- Nothing changes with secured creditors rights. They may repossess if the debtor is in default.
Why do some companies say Debt Agreements or Personal Insolvency Agreements are the way to go?
The main reason you find plenty of ads on TV enticing you to sign up for one of these debt options is simple, there is plenty of money in it for the companies that administer these arrangements, at the very lease 20% commission on every cent you pay back. You may also notice, if you haven’t already, that when it comes to financial advice every company tends to giveadvice according to the product or service that they offer. For example Debt Agreement Companies ridicule bankruptcy companies and so it goes with much of the financial services industry.
Should I consider a debt consolidation loan?
There may be the occasional circumstance where a debt consolidation loan is a good idea. Generally, however, this option just bundles 3 to 15 different small loans into one great big hard to repay loan. If you are flat out paying all these different loans now, why do you think it will be magically easier to have one enormous bill? Just to add insult to injury you have to pay up front for the luxury of this option.
If you want to get some clarity here simply give us a call on 1300 795 575 ordownload “The Big 5” e-Book.
Bankruptcy and the Family Home
Child support paid to you is always considered in bankruptcy. If you pay child support this will be also considered, for example if you pay $5000 child support each year and you have no dependants living with you then your revised net income limit will be increased to $55,332.10.
If you need more information about your income thresholds go ahead and download “The Big 5” E-book. There are some circumstances where where it is not economically viable to file for bankruptcy because you earn too much in comparison to the debt you have.
How much of my pay can I retain?
The Income Threshold Amounts as of April 2016 that you can keep is basically your net income after tax and child support (if applicable) is deducted. If you’re in business whilst bankrupt, then of course it’s also after net (after tax) business expenses, which is normally calculated annually.
Your net income could be adjusted to take into account things like salary sacrifice and excessive superannuation payments etc. Your net income could also allow for additional unusual costs incurred as a result of being employed, for example if you incur an unusually high amount of travel expenses to get to and from your job this can sometimes also be considered. Your bankruptcy trustee has to determine your real net income according to the bankruptcy rules.
The income threshold figures are also per person, and are adjusted by the Government every March and September to allow for the movements in the cost of living.
As of March 2016 the income thresholds are as follows;
With no dependants your net income can be $54,518.10 net per annum, i.e. that’s an average of $1,048.25 net per week take home pay. This is your spending money. It’s all yours. It’s what you can keep, and so anything over that amount is split 50/50 with your bankruptcy trustee to be paid to your creditors.
With 1 dependant your net income can be $64,331.36 net per annum, i.e. an average of $1,237.14 net per week take home pay.
With 2 dependants your net income can be $69,237.99 net per annum, i.e. an average of $1,331.49 net per week take home pay.
With 3 dependants your net income can be $71,963.89 net per annum, i.e. an average of $1,383.92 net per week take home pay..
With 4 dependants your net income can be $73,054.25 net per annum, i.e. an average of $1,404.88 net per week take home pay.
With more than 4 dependants your net income can be $74,144.62 net per annum, i.e. an average of $1,425.85 net per week take home pay.
If you feel like your situation is more complex, then please get professional advice. If you have a particular income question just give us a call here at Bankruptcy Experts on 1300 795 575.
What can my partner earn if I go bankrupt?
There is no limit to what your spouse can earn. Your other half can earn a million dollars and they will not be required to contribute to your debts.
What if my spouse/partner and I both need to go bankrupt?
If a husband and wife each go bankrupt, and say that they’ve got no dependants, then they can each earn $1,010.45 net. A practical way to understand it is the same income rules apply for each person in the home.
Who is considered a dependent?
In the case of bankruptcy a dependent is anyone you support who earns less that $3,343 per year.
Bankruptcy And Self-Employment
Will I lose my business if I go bankrupt?
The short answer is you don’t have to but you do need to get the right advice. Corporate insolvency laws are very involved and you need to tread carefully if you want to continue to be self-employed.
Although it is true you can no longer be the director of a Pty Ltd Company while you are bankrupt, however that doesn’t automatically mean you can’t run your own business as a sole trader and continue to employ staff etc
What if my business has serious debts?
As a part of your bankruptcy we can also help you wipe out your business debts so you can get a fresh start.
Should I put my company into liquidation?
One of the main reasons you may want to consider liquidation as opposed to bankruptcy is because if you liquidate your company it doesn’t automatically mean you need to go bankrupt.
In Australia, businesses that become insolvent have a few options such as liquidation, voluntary administration and so on. If you want to know more about liquidation and company re-structuring check out our Liquidation information section or download “The Big 5” e-Book. Remember it’s individuals who go bankrupt not businesses.
This is a complicated area so get some expert advice on this one if you have a business. Generally speaking, the debts in a business and personal debts go hand in hand when a business owner goes bankrupt. At Bankruptcy Australia we can help think through this process call 1300 795 575.
What impact will bankruptcy have on my business?
A restriction that applies when you are bankrupt as a business owner is that you can be in your own business as a sole trader only. For some business owners, bankruptcy affects their ability to run the business because of the licensing issues.
For example, if you run a building company, your licence will be suspend once you’re bankrupt and as a consequence you can no longer trade without that licence.
Isn’t it illegal to run a similar business after bankruptcy?
It can be. There are considerations when and if you go bankrupt as a business owner: for example you cannot rack up heaps of debt in your business, then go bankrupt and then open the doors the next day like nothing had happened. You cannot pay one creditor a whole heap of money, and nothing to any one else you owe money to. There are laws in place to prevent what is called phoenix companies popping up out of the ashes of an old company. If you want to know more about this go to the Liquidation section on this website.
Don’t get overly stressed about what you can and can’t do as a business owner, just get the right advice call 1300 795 575.