Personal bankruptcy is what occurs when a person of normal means becomes overwhelmed with debt which they are unable to repay. One should always know what impact personal bankruptcy will have before filing for bankruptcy. Unfortunately, many myths and stories exist around bankruptcy that often scare or worry people unnecessarily.
Bankruptcy Myth #1: all of my personal assets will all be lost
This is not always true.
Some of your assets are protected under bankruptcy, such as a motor vehicle that is estimated to be worth less than $8,150 . Any items that you may use to make a living (also known as ‘Tools of Trade’) that are worth less than $3,800. Your retirement fund (also known as your superannuation).
Bankruptcy Myth #2: all of my income will be lost or restricted when I file for bankruptcy
This is not always true.
Your income will be assessed every year for compulsory income contributions. If your assessed income exceeds the set limits, you will be required to financially contribute money toward the bankruptcy. The limits are revised every six months, however, it is important to understand that if you exceed the set limits you will not lose your income, but you will be required to make a financial contribution towards your bankruptcy.The payments are 50% of the amount which exceeds the set limits.
Bankruptcy Myth #3: everyone will know I filed for bankruptcy
This is not always the case.
It is true that a record of your bankruptcy is maintained on a public database known as the NPII, but for one to access this information they must pay a search fee to the registry. Given it is not a free search it is not usual practice to search this database. Your bankruptcy will not be published anywhere publicly.
Your bankruptcy status will however appear on your credit file for a period of 7 years.
Bankruptcy Myth #4: I will never get out of bankruptcy
False: Bankruptcy only lasts a number of years.
In Australia, the usual time period is 3 years, however, bankruptcy can be extended in certain circumstances. The extension can be to up to either 5 or 8 years.
Does Bankruptcy seem so bad?
Sure, there are certain restrictions placed upon you (most of which will only last for 3 years), but many of the myths that cause people to worry so much about bankruptcy are just that, myths. Don’t let secrets and whispers scare you away from what is often an effective method to solve serious debt problems.
If you need to speak to a debt advisor, we offer a free advice line. Call Today on 1800 676 598