It can be hard to get accurate information about bankruptcy and its effects. Most of the time people in your situation are worried that they will never get credit again, they will lose their household items, or that everyone will know about their situation.
Over 18,000 Australians declare bankruptcy every year, that’s over 50 people a day who remove their debt, and move forward with a fresh start.
Below, we have compiled a list of the 5 main consequences of bankruptcy. You may be surprised, as the consequences generally aren’t as bad as people think.
We can guide you through the process, and your money can be yours again.
The 5 main consequences of bankruptcy
Your bankruptcy will last for 3 years
In this time, your ability to obtain credit will be negatively affected. The bankruptcy will appear on your credit file, but is removed 2 years after your bankruptcy is complete.
your name will appear on the National Personal Insolvency Index
This is the bankruptcy list. While your name will stay on this list, people need to pay a fee in order to search this list. It is separate from your credit file, and is generally only used if you are the director of a company.
You are not allowed to be the director of a company
You aren’t allowed to be the director of a company or trust, but only for as long as your bankruptcy lasts. There is no restriction as to what industry you work in as far as the bankruptcy act is concerned though.
you will need to apply for permission to travel overseas
You are allowed to travel overseas, but you will need to apply for permission to do so while bankrupt. It is rare that people are banned from travel. If you have travel planned, give us a call and we can discuss your situation.
If you reach the income threshold, you will need to make some repayments towards your debt
The income thresholds are quite generous and depend on your situation. Our clients rarely have to make income contributions. There is no limit to the amount of money you can save while bankrupt, and you will not have to close your bank accounts.
So how will I be affected?
In short, how you will be affected by bankruptcy depends on your situation. The main consequence is the limited ability to obtain credit in the short-term, but most people have had enough of debt and are looking for a fresh start. For accurate info, it’s best to contact us directly and we can discuss your situation.
There is a great deal of misinformation regarding bankruptcy, But the truth is that the consequences are not meant to be a punishment. They are meant to help everyday Australians get back on track, and protect consumers from their creditors.
If you have further questions, feel free to browse our FAQ’s below, or give us a call and one of our insolvency experts can explain how bankruptcy will look for you.
Frequently Asked Questions
For most everyday Australians, there are next to no negative consequences. It all depends on your particular situation, and we can help. Depending on your position, you won’t have to forfeit any of your personal assets, you won’t have to give up any of your wage, and your day to day life won’t be affected.
You may have heard of Part IX Debt Agreements. These are great at getting creditors off your back, but they don’t take care of your debt. Part IX Agreements require you to pay back an agreed amount (around 70% of your debt) to your creditors over a period of time, generally 4 years. The problem is they keep you in debt, and don’t give you any more financial freedom. You still have your name recorded on the National Personal Insolvency Index, but your debt remains. We believe bankruptcy is a much more viable and beneficial scheme for everyday Australians as your debts are wiped, your income isn’t affected, your credit is repaired sooner and the process is much quicker.
Bankruptcy is an extremely private process. Over 18,000 Australians declare bankruptcy every year, so it happens much more often than you think. Chances are, you have already met many people who have declared. There is no need to attend court, no need to meet with anyone in person. We can help you complete your bankruptcy from home, and the only people who know about your situation are the ones you tell. Your name is recorded on the National Personal Insolvency Index, but your bankruptcy is deleted off your credit file 2 years after you are discharged.
We have found that 99% of the personal bankruptcies we have been involved in last only 3 years. You may have heard 7 or 9 years, but this doesn’t apply to most people. Your bankruptcy will be recorded on your credit file for 5 years, but after that it is cleared. In contrast, Debt Agreements last 4 years and generally require you to pay back 70% of your debt. We’d be happy to discuss your situation with you, obligation free.