Bankruptcy
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A Healing Process
Bankruptcy is not the end of your business or professional life, it is the end of unsustainable debt. At Taylor Insolvency we will work with you where we can to keep your family home within your family and with you to ensure that the Bankruptcy process is a healing process for you and your creditors and not a combative one.
Impact of personal bankruptcy
Your real property form part of your Bankrupt Estate and must be realised by your Trustee. However, if possible we will realise your real property in such a manner that allows your family to keep and stay in your family home. The two most common methods are:
2 MOST COMMON METHODS
Example 1
Mr Wang runs a painting business but due to unforeseen circumstances he has large outstanding debts that he cannot pay and has to go bankrupt.
Mr and Mrs Wang jointly own their home with a mortgage on it. The home is worth $1,500,000 with $700,000 owing on the mortgage. Therefore the equity or value in the property for Mr Wang’s creditors is $30,000. As the property is jointly held, Mr Wang’s creditors only have access to half of that amount.
We will look at selling the property to Mrs Wang for approximately half this amount placing the property entirely in her name (pending bank approval and stamp duty).
Example 2
Ms Sun is a nurse, however, illness and helping family members have left her in crippling debt with no choice but bankruptcy.
Mary owns a home worth $600,000 with $550,000 owed to the mortgagee. We would look at doing a Deed of Forbearance with Ms Sun where instead of creditors selling the property and likely getting very little return after the costs of sale are included. Mary would pay $50,000 back to her Bankrupt Estate in return the for Trustee of the Bankrupt Estate to agree to not sell the property for the entirety of the time the property is vested in the Bankrupt Estate 3 years of bankruptcy and 6 years after that.
The property then remains as Mary’s and eventually legal title returns to her.
If possible, we will work out a way to both ensure creditors receive what they are entitled to and keep you in your family home.
BANKRUYPTCY MYTHS
Income
You can earn as much income as you are able to during Bankruptcy.
The only restriction on your income during Bankruptcy is above the income threshold you have to contribute 50% of your net income back to your creditors. This income test is for the three years of your bankruptcy.
For example, if your after-tax income is $80,000/year, you do not have anyone relying on you financially. Then you may be liable to pay $7867 to the Trustee. This amounts depends on the number of dependents, the amount of child support you pay, any additional income and if the employer provides you with the use of the employer’s vehicle, etc.
Overseas Travel
One of the biggest myths in Bankruptcy is that you can not travel overseas. This is not true. To travel overseas you must simply obtain the consent of your Bankruptcy Trustee.
To obtain the consent of your Bankruptcy Trustee, please see the Travel request form link here.
At Taylor Insolvency we commonly have bankrupts travelling, holidaying and working overseas, after all Bankruptcy is meant to help you with life not make it harder.
Vehicles
The Bankruptcy Act allows you to keep your vehicle which includes cars or motorbikes mainly used for your transport so long as the net value of this vehicle is not above $8550.00
If your vehicle is above this amount and you still wish to keep it contact us to discuss how you can contribute to your Bankrupt Estate and still end up retaining the vehicle.