Bankruptcy Darwin, So what is the Deal with Debts?

Just what Debts are removed if I go Bankrupt?

The basic answer is that when it comes to Bankruptcy most debts are wiped, and I have provided a chart below for you to look at.

But, put simply some of the exceptions are Centrelink Debts, Child Support, Court fines (like speeding fines) and any debts arising from uninsured Motor-vehicle claims and educational debts for instance, HECS or FEE-HELP. These debts are not removed when you file for bankruptcy.

What about Secured Debts?

A secured debt is a car loan or a home loan; it is a debt that has some real security linked to it. So for instance if you buy a new car for $40,000 dollars the security for this car is the actual car itself.

So, can my secured debts be wiped out if I file for bankruptcy?

Yes. If you have a car loan for $40,000 you can have that debt erased if you simply hand back the car. So the lesson is that you cannot have your cake and eat it too (so to speak), so yes all of your secured debts might be wiped but the asset will need to be sold or returned. This is just one facet that, when it comes to Bankruptcy, it is necessary to get professional advice - like that readily available at Bankruptcy Advice Darwin.

What about my Tax Debts with the ATO can they be erased If I go bankrupt?

Yes they can, both business and personal debts owing to the ATO can be erased with bankruptcy. If you have a business with any sort of debts find some advice because it is not always so easy. Feel free to call us here over at Bankruptcy Advice Darwin if you have any type of questions on 1300 879 867. Or feel free to go to our website: www.bankruptcy-advice.com.au/Darwin.com.au

What about my business or Company debts?

In some cases when it involves Bankruptcy we can really help you with your business debts, call us concerning this first. Remember bankruptcy applies to an individual not companies, trusts or businesses. Generally you may have to liquidate a company to deal with the debt this way. And when it comes to Bankruptcy, it can be a complicated area, so remember there are implications for a business owner such as insolvent trading. At Bankruptcy Advice Darwin we specialise in business and personal debts so contact us here at Bankruptcy Advice Darwin if you have any questions about Bankruptcy on 1300 879 867. Or feel free to visit our website: www.bankruptcy-advice.com.au/Darwin.com.au

Bankruptcy, Will I lose my Superannuation?

Bankruptcy in Australia can be involved and difficult to understand. A question we typically get asked here at Bankruptcy Advice Darwin is 'what happens to my super if I file for Bankruptcy'? The reply for most is straightforward, if your super is actually in a regulated fund or industry fund like Sunsuper or Host Plus then absolutely nothing happens; your super is 100 % safe when it comes to Bankruptcy.

What if I have a Self Managed Super Fund?

This is a growing concern, take into account the developing number of members of Self-Managed Super Funds ("SMSFs") in the last few years; the ATO tells us it has grown Australia-wide from 758,589 in 2009 to 1,011,689 in 2014. So what happens to these Superfunds when it involves Bankruptcy?

Remember Bankruptcy Advice Darwin is not indicating this post is the complete story, if you have any questions feel free to contact us on 1300 879 867. Whether you call us or somebody else it doesn't matter, just please don't walk into bankruptcy blind when it comes to your SMSF actually we recommend you look for both legal and financial advice before proceeding with any of the actions proposed in this article.

What is a Disqualified Person?

First and foremost, if you are considering Bankruptcy, you can not be a part of a SMSF. Why? Because if you are facing bankruptcy, you will be categorized as a 'disqualified person'. And a disqualified individual cannot operate as an Individual Trustee. This poses a problem due to the fact that usually most of the SMSFs are just 2 people, which means both of these members must also be the individual trustees. The role of trustee poses a lot of legal rules, and if you are in this role I would highly encourage you to become familiar with them all-- including the fact that you can not 'know or suspect' that one of you are bankrupt. So you can see how an individual bankruptcy can be very detrimental to a SMSF and as you can assume the process of Bankruptcy for a SMSF is rather convoluted.

How much time do I have to restructure my SMSF Fund once I'm bankrupt?

So what comes about if one of the members of an SMSF does enter Bankruptcy?

For starters, the SMSF will need to be reorganized. This means that you will have to consider your entire structure and ensure that it is meeting the basic conditions, including having a new trustee that is not encountering issues with Bankruptcy. The Australian Tax office will give you a 6 month 'grace period' to get this done before you face penalties. And bear in mind, sometimes the most suitable plan would be to simply roll the fund into an industry or corporate fund.

Beyond these large scale restructuring issues, there is a lot of paperwork to deal with too, and you need to be frequently keeping the ATO informed of what is happening. This indicates you need to let them know that you have a bankruptcy complication with your current trustee, that they are being removed as soon as possible know who the new trustee/director is. The Bankrupt will also need to inform the ATO using the form NAT 3036 (Found on the ATO website) and they need to also notify ASIC of their resignation.

During that 6 month period you will need to remove the Bankrupt from the SMSF-- including their property and assets. Remember if you are not exactly sure call Bankruptcy Advice Darwin for some free advice on 1300 879 867.

What if I have a single member fund?

If you are a single member fund, then you will need to appoint a new director, and it will then be their obligation to oversee the sale and transfer of assets into a managed fund. If there are two or more members, than the bankrupt member will have to resign and the other member will clear away the property and halve the proceeds. They would then want to decide if they wish to remain as a single member SMSF, or if they want to roll it all into a managed fund. If both members are entering bankruptcy, then they would definitely need to sell all assets right away and move the liquid assets to the managed fund.

From that you can see how when it comes to Bankruptcy, even though one single member is dealing with issues, it can affect the very existence of an SMSF. If you are at this point facing this trouble yourself, or with a partner in a SMSF, please seek financial advice to make sure you are satisfying the ATO requirements.

A simple solution ...

As I proposed earlier, a simple solution to your SMSF situation is to put your super back into a normal regulated managed fund prior to bankruptcy and save yourself all the problems outlined above. Bankruptcy is never easy, but getting proper advice is the best initial step. If you want to discuss your options further, contact us at Bankruptcy Advice Darwin or visit our website: www.bankruptcy-advice.com.au/Darwin.com.au or just call us on 1300 879 867.

Bankruptcy in Darwin - Will I lose my house if I go bankrupt?

Bankruptcy Darwin is a difficult to understand process, but I know from meeting with thousands facing the prospect of bankruptcy over the years, that virtually nothing troubles people more than the notion of losing the family home or apartment. Almost everyone is on an emotional level connected to their home - it's where the kids have grown up, it's where you take pleasure in life on a day to day basis.

Will you lose your home if you go bankrupt? The reply is a resounding maybe. (not very helpful, I know) People typically believe it's an inevitable consequence and a part of Bankruptcy, and because of this push themselves to the brink of insanity to not lose the family home. But when it comes to the whole process of Bankruptcy, a key advantage of Debt Agreements and Personal Insolvency Agreements is you can keep your house. The reason is simple: you've accepted to pay back the debt you are in.

So how is it possible to keep my Darwin house, you ask? It's easier if I explain the basic idea behind the Bankruptcy process as administered by the trustee, then you'll have a clearer image.

The duty of the bankruptcy trustee is to firstly agree to the regulation of the bankruptcy act 1966 (it's a very dry read about 600 pages if you are serious).

Within that regulatory framework, the trustee is to help recuperate monies owed to your creditors, that is accomplished in a bunch of different ways but it mainly comes down to income and assets. The trustees role is to collect payments over and above your income threshold. The other role is to sell any assets that can contribute to repaying your debts.

What this seems is that yes the trustee will sell your house right? Not normally. The only reason the trustee will sell any asset including your house is to get money to pay back your debts. If there is no equity in your house then it's pointless to sell your home. This is happening much more since the GFC as house prices in many locations have been heading south so what you paid 4 years ago may not necessarily reflect the price today.

A quick word of advice here if you have a house in Darwin and are looking at Bankruptcy: get a professional to help you through this process, there are plenty of variables in these scenarios that have to be considered.

You might wonder, why would the bank want bankrupt clients? wouldn't they need to sell your house and not take the risk? The bank that has nicely lent you the money for your house is making good money every month in interest out of you, month in month out, just as long as you keep up to date with your fees then the bank wants you in there at all costs. Ultimately however it's not the bank's call if the trustee figures out that there is plenty of equity in your house the trustee will force you and the bank to sell the house.

When you file for bankruptcy you are asked to write down the value of your house and the amount you owe on the house. A tip if you are aiming to work out the value of your house: use a registered valuer as this will provide you peace of mind, don't use your neighbours' gut feel recommendations or a real estate agents advice to get to this figure. When you get a valuer out to your home, make certain you tell the valuer to value the property for a quick sale, make sure you mow the lawn and don't leave the kitchen in a mess also.

Valuers used to provide two valuations: one for a quick sale and one for a well marketed non time delicate sale. These days that's not the case, but if you meet them and tell them you need to sell the house in the next 30 days you may sway the result. The idea is that you want a sound sell now figure.

There are two reasons this valuation process is critical to you: one you will likely have peace of mind ascertaining the market value of your house, and then you can easily create your equity position. The second thing is, your home may be really worth even more than you thought. Get some advice before carrying this out. The number of times I've met with clients that have sold their family home of 20 years simply to discover I could of helped them keep it; unfortunately this happens all too often

When it comes to Bankruptcy and houses, another major consideration is ownership, often houses are acquired in joint names. In other words a couple may be a house 50/50 using both incomes to make the payments. If one party declares bankruptcy and the other party does not, the equity is only factored on the 50 % of the property.

When it comes to Bankruptcy, this is just one of probably numerous scenarios that are likely when it relates to the family home. Bear in mind the non-bankrupt party can buy the bankrupt's part of the house in bankruptcy also. I need to repeat this but get some assistance on this area of Bankruptcy because it is very tricky and each and every case is different.

If you would like to learn more about what to do, where to turn and what questions to ask about Bankruptcy, then feel free to speak with Bankruptcy Advice Darwin on 1300 879 867, or visit our website: www.bankruptcy-advice.com.au/darwin