By Stefan Chelper, Lawyer
As a litigation lawyer, I have heard people talk about bankruptcy quite casually. Unfortunately a lot of us don’t realise the harsh realities of becoming bankrupt and what it can mean for you, if you do go down that path . It should be an absolute last resort, and here’s a few reasons why:
1. A trustee takes over your affairs
If you do declare bankruptcy, you are no longer in charge of your assets or income, with all relevant financial information needing to be passed on to your trustee. A trustee manages all of your relevant affairs for the period of bankruptcy. Please note that the period of bankruptcy will soon be changing from 3 years to 1 year which may in fact soften the blow.
2. Overseas Travel
Your trustee may elect not to allow you to travel overseas during your bankruptcy period. You can of course request permission to do so, but having that permission granted is not a foregone conclusion.
3. Once a bankrupt, always a bankrupt
Unfortunately a search of the National Personal Insolvency Index will keep a record of this forever. This of course can affect your ability to obtain credit in the future, making that house or car you’ve always wanted all the more unattainable.
4. You still need to pay back your debts
Bankruptcy isn’t an easy way out of debt and financial troubles. While you might be able to avoid paying back unsecured debts, you won’t be covered for things such as Court fines, HECS debt, child support or debts incurred after your bankruptcy.
5. You might not own what you earn
If you earn over a set amount during your bankruptcy, you might need to pay some of that back to your trustee, making getting ahead all the more difficult.
There is a lot of great information on https://www.afsa.gov.au/insolvency/i-cant-pay-my-debts/what-are-consequences-bankruptcy where they address bankruptcy and its consequences in more detail.
If you do find yourself in a financial bind, professional financial advice is definitely important, but don’t forget to contact your lawyer to see if there are any ways you can avoid going down this path.
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