It’s a difficult subject. Making the tough decision to file for bankruptcy certainly isn’t to be taken lightly, but the wealth of bankruptcy myths and misconceptions that abound do nothing to help. Considering the entire legal process is designed to ease financial strains so you can take a weight off your shoulders, the last thing you need is to be faced with misinformation that could deter you from taking this significant step. That’s why getting clued up on business bankruptcy facts couldn’t be more important.
As business restructuring and insolvency experts, Corporate Lifeline wants to demystify what it means to go bankrupt in Australia and give a clearer representation of the reality you may face. Here, we’ll debunk common myths and misunderstandings to leave you with just the facts about bankruptcy.
Does bankruptcy mean I’ll lose everything?
One of the most important business bankruptcy facts to highlight is that choosing bankruptcy won’t leave you with nothing. While it’s true that your bankruptcy trustee will be required to seize and sell off some of your assets to pay the debts owed, that doesn’t mean you will lose everything. Bankruptcy law in Australia includes asset exemptions that permit you to retain certain possessions. These include:
-
Household Possessions
Generally speaking, household goods, clothes, and furniture are unaffected by bankruptcy, meaning you can keep most day-to-day items.
-
Your Car
You may be able to keep your car, motorbike or other vehicle provided that it is proven to be your sole mode of transport and falls below the set value threshold.
-
Your Money
While the majority of the money in your bank account will be seized by your bankruptcy trustee, you will be left with enough money to cover modest living expenses.
-
Your Work Tools
If you have any tools, equipment, or materials that are essential for work, you can keep these up to a set value.
Does going bankrupt in Australia prevent me from travelling overseas?
The belief that bankruptcy affects your ability to travel freely is a prevailing myth. Your trustee will generally consent to overseas travel providing you continue to comply with your duties. It is important to remember that you will need to obtain your trustee’s consent, though, which often includes supplying an itinerary and proof of funding for the trip.
Do I have to owe a certain amount to file for bankruptcy?
You may have visions of the dollars stacking up to unimaginable heights before you can file for bankruptcy. However, in Australia debt only needs to amount to $5,000 for you to be eligible for bankruptcy. Of course, the sum must be proven to be beyond your ability to pay off in order to qualify for this kind of debt relief – it all comes down to what you owe compared with your income.
Will I be able to earn money if I’m bankrupt?
Many believe that going bankrupt will prevent them from being able to earn an income in the future. Not only is this a common misconception, but it would also be wildly unfair! What happens when you go bankrupt is your existing debts are erased and you’re given a fresh start. That means you’re free to take home any income going forward. However, if you earn above a certain amount after tax, you’ll be required to contribute a percentage of your income to your trustee.
If I’m bankrupt, will my credit be ruined forever?
It’s true declaring bankruptcy will negatively impact credit scores, but that won’t last forever. One of the biggest questions asked when considering bankruptcy is how long does bankruptcy last? In Australia, bankruptcy listings remain on credit reports for 5 years. After this time, your temporary record will expire and you’ll be able to work on rebuilding your credit.
In fact, conversely, bankruptcy may leave you in a better financial position. If you think about what happens when you declare bankruptcy, you’re given a clean slate. This means that, not only is your risk of getting further into debt dramatically reduced, but you may even be able to begin saving money again.
Do bankrupt companies indicate financial irresponsibility?
Absolutely not. The need to consider bankruptcy can arise as a result of all kinds of unforeseen circumstances, from economic downturns and increases in costs, to unexpected changes in personal circumstances. It is the responsibility of directors to consider if and when bankruptcy becomes a legitimate solution for their businesses, just as it’s up to each individual to decide if bankruptcy is right for their personal situation. Indeed, if we’re discussing bankruptcy facts in Australia, recklessness and irresponsibility aren’t often part of the conversation.
Does bankruptcy mean I failed?
This is perhaps the hardest myth to debunk, but believe us when we say, bankruptcy does not mean failure. While the consequences of going bankrupt in Australia can be difficult to come to terms with, it’s important to keep any sense of ‘failure’ out of the equation. Instead, try to view bankruptcy for what it really is—a financial remedy that offers non-judgemental help and the opportunity to start over. With the right support, choosing bankruptcy can offer the fresh start you need to move forward.
Who can I talk to about bankruptcies?
We hope this article has highlighted the truth behind the stereotypes and provided some much-needed clarity on the subject of bankruptcy. If you need any further advice, guidance, or support, then you’re in the right place.
At Corporate Lifeline, we are committed to helping you find the solution to whatever financial problem you face. We’ve already helped hundreds of individuals and businesses deal with their unique financial challenges, and now we’re here to help you. If you’re wondering how to declare yourself bankrupt or feel that this might be the right course of action for you, then speak to us about voluntary bankruptcies today. One of our expert advisors will gladly answer any questions concerning Australian debt solutions to get you back on the right track.
