Bankruptcy is generally the last resort for people experiencing financial difficulties. Too often the feelings of embarrassment around money problems stop people from admitting they have a problem. This is the worst approach as there are solutions, such as informally dealing with creditors or having a formal arrangement (i.e. a Part X agreement) which can help.
What is bankruptcy?
Bankruptcy is a legal process that releases people from most of their debts. If you are declared bankrupt under the terms of the Bankruptcy Act that means you are insolvent.
There are a number of consequences and implications of being declared bankrupt so it is not a situation to be entered into lightly. These include:
- Being automatically disqualified from managing any corporations or becoming a director, alternative director or company secretary without permission from the Court.
- Your most significant assets will be sold to repay creditors.
- Higher income earners may have to make compulsory payments to the bankruptcy trustee during the bankruptcy term.
- There is likely to be a negative impact on your professional qualifications.
- Creditors are unable to commence or continue the legal recovery of their debts.
There are also misconceptions around bankruptcy. Specifically, bankrupts are allowed the following:
- They can generally retain all their household furniture and effects.
- They are allowed to retain a motor vehicle and tools of trade up to certain values.
- They can generally retain their superannuation.
- They are not imprisoned for simply not paying their debts.
At WAIS, we can help you work through your best options and, if bankruptcy is the most appropriate solution, we provide support throughout the process.