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 for the 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.
BANKRUPTCY MYTHS
Income
A common bankruptcy myth is that your income is restricted but the truth is, you can earn as much as you are able to during bankruptcy.
The only restriction on your income during bankruptcy is that if you earn above an *indexed amount, you have to contribute 50% of the amount you go over the indexed amount to your bankrupt estate. The income test applies for the undischarged period of bankruptcy which is usually three years.
For example, if your after-tax income is $80,000 per year and you don’t have any dependants, you would be liable to pay approximately $3,942.00 for that first year of bankruptcy. The amount you will have to pay will vary based on the number of dependants you have, whether you pay child support and if you receive any benefits like a work vehicle or free accommodation.
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, get in touch with our office and we will supply you with the form to complete.
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
Bankruptcy doesn’t mean you can’t have a vehicle. The Bankruptcy Act allows you to keep your vehicle (cars or motorbikes, etc) if it is your primarily source of transport as long as the value is not above the index amount of *$9,400.00. If your vehicle is above the limit and you want to keep it, get in touch with us and we can discuss how you can contribute to your bankrupt estate to keep your vehicle.
*All amounts referred to as indexed amounts are indexed by the government. These amounts increase every year and are accurate at the time of update. Current indexed amounts can be accessed on AFSA’s website.