Losing your house: Just how much do you understand about Bankruptcy in Australia?

The biggest concern a lot of people have when they come to our company regarding Bankruptcy is generally 'Can I keep my house?' and sometimes the answer is yes, you can keep your house.

The only reason you may be forced to sell your family home when you file for bankruptcy is actually due to the fact that you have a lot of equity in the house that it is regarded as an asset. Please check out these straightforward hypothetical case studies below to get your head around Bankruptcy and how it has an effect on houses in Australia. Remember If you want to know more regarding Bankruptcy and houses feel free to consult with us here at Bankruptcy Advice Australia on 1300 879 867, or visit our website: www.bankruptcy-advice.com.au/Australia.com.au

Case Study 1. (Mike & Sue Smith).

5 years ago Mike and Sue bought a house in a mining town for $450,000. At this time the mining boom was helping keep all the property prices nice and high. Now they are needing to look at Bankruptcy since they have massive debts of $80,000 on top of their mortgage and credit card and tax debt.

They really want to keep their house but wonder if they can, they know that house prices if anything have gone down in the area in the last 5 years so to be safe they think that their home is currently only worth $450,000 after all these years, to make sure they searched www.realestate.com.au/ sold section of the website to see what other houses in the streets close by have sold for recently.

However they have not paid any principal of the home loan over the last 5 years, mainly just interest, so they still owe $450,000.

Current House Value = $450,000.

Current Mortgage Value = $450,000.

Net Equity Value = $0.

Because there is no equity in this property the trustee will not ask Mike and Sue to sell their home when they go bankrupt, as long as they keep up the mortgage payments then all will be well for them for the 3 years they are in bankruptcy.

At the end of the bankruptcy period of time the trustee will write to them and ask if they wish to take over ownership of their house again and so long as it has not increased in price over the 3 years they have been bankrupt they will be asked to make an offer to have their house back. This is usually somewhere between $3,000 and $5,000 to cover the legal costs of changing the land title deed etc.

Now let's have a look at a slightly different example of Bankruptcy and houses.

Case Study 2. (Bill & Michelle Johnson).

2 years ago Bill and Michelle purchased a townhouse in a lovely suburb of Australia for $850,000 they tipped in $50,000 as a deposit and now the townhouse two years later is worth $900,000.

Current House Value = $900,000.

Current Mortgage Value = $800,000.

Net Equity Value = $100,000.

As a result of a recent business failing Bill is about $240,000 in debt. Michelle who does work in banking has a separate job and no other debt except for the mortgage. Bill cannot pay his debts and so he is reviewing Bankruptcy. Michelle is bothered that she too may need to declare bankruptcy or be obliged into it due to the house loan.

Within this particular case the trustee is required to access or get their hands on Bill's part of the equity which is $50,000 less selling costs. They may do this in a few ways; 1. Make them sell the home. 2. Invite Michelle to buy Bills half of the equity. 3. leave them in the home - but It's very unlikely in this case that the trustee would be happy to leave Bill and Michelle in the house because there is just too much equity.

So Michelle may have the opportunity to purchase Bill's share of the equity by coming up with $50,000 and buying out Bills' half and from that moment its now 100 % Michelle's house.

Property and Bankruptcy in Australia is confusing and demanding, these two case studies above are just the tip of the iceberg as far as your options in Australia are concerned. If you need to know more about Bankruptcy and houses feel free to call us here at Bankruptcy Advice Australia on 1300 879 867, or head to our website: www.bankruptcy-advice.com.au/Australia.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 Australia is 'what happens to my super if I file for Bankruptcy'? The reply for most is easy, if your super is normally in a regulated fund or industry fund like Sunsuper or Host Plus then 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, look at 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 comes down to Bankruptcy?

Remember Bankruptcy Advice Australia is not suggesting this short article is the complete story, if you have any questions feel free to get in touch with us on 1300 879 867. Regardless if you call us or someone else it does not matter, just please don't walk into bankruptcy blind when it comes to your SMSF in fact we strongly recommend you ask for both legal and financial advice before proceeding with any of the actions indicated in this article.

What is a Disqualified Person?

First and foremost, if you are thinking about Bankruptcy, you can not be a part of a SMSF. Why? Because if you are facing bankruptcy, you will be labeled as a 'disqualified person'. And a disqualified individual cannot operate as an Individual Trustee. This poses a problem since usually most of the SMSFs are just 2 people, which means the two of these members will need to also be the individual trustees. The duty of trustee poses a lot of legal rules, and if you are in this role I would highly recommend you to get aware of them all-- for example the fact that you can not 'know or suspect' that one of you are bankrupt. So you can notice how an individual bankruptcy can be rather destructive to a SMSF and as you can imagine the process of Bankruptcy for a SMSF is rather convoluted.

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

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

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

Beyond these large scale reorganizing issues, there is a lot of paperwork to deal with too, and you need to be continuously keeping the ATO informed of what is happening. This indicates you need to let them know that you have a bankruptcy problem 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 must also notify ASIC of their resignation.

In the course of that 6 month period you will need to remove the Bankrupt from the SMSF-- including their property and assets. Remember if you are uncertain call Bankruptcy Advice Australia for some free advice on 1300 879 867.

What if I use a single member fund?

If you are a single member fund, then you will have to appoint a new director, and it will then become their obligation to oversee the sale and relocation 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 remove the property and halve the proceeds. They would then need to decide if they choose to remain as a single member SMSF, or if they would like to roll everything into a managed fund. If both members are entering bankruptcy, then they would definitely need to sell all assets at once and move the liquid assets to the managed fund.

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

A simple solution ...

As I recommended earlier, a straightforward solution to your SMSF problem is to put your super back into a normal regulated managed fund before bankruptcy and save yourself all the headaches outlined above. Bankruptcy is never easy, but receiving proper advice is the best 1st step. If you want to discuss your possibilities further, contact us at Bankruptcy Advice Australia or visit our website: www.bankruptcy-advice.com.aau/Australia.com.au or just call us on 1300 879 867.

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

Bankruptcy Australia is a difficult to understand process, but I know from meeting with thousands facing the likelihood of bankruptcy over the years, that pretty much nothing concerns people more than the thought of losing the family home. Almost everyone is emotionally connected to their home - it's where the kids have grown up, it's where you appreciate life on a day to day basis.

Will you lose your home if you go bankrupt? The response is a resounding maybe. (not very helpful, I know) People generally presume it's an inevitable consequence and a part of Bankruptcy, and therefore 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 Australia house, you ask? It's easier if I explain the basic principle behind the Bankruptcy process as administered by the trustee, then you'll have a clearer image.

The job of the bankruptcy trustee is to firstly follow the regulation of the bankruptcy act 1966 (it's a very plain 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 carried out in a bunch of distinct ways but it mainly comes down to income and assets. The trustees role is to collect payments over and above your income threshold. The further role is to sell any assets that can contribute to fixing your debts.

What this seems like is that yes the trustee will sell your house right? Not always. 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 on your property then it's pointless to sell your home. This is happening much more since the GFC as house prices in many regions have been heading south so what you paid 4 years ago may not automatically reflect the price today.

A quick word of advice here if you have a house in Australia and are looking at Bankruptcy: get a qualified professional to help you through this process, there are a number 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 generously lent you the money for your house is making good money every month in interest out of you, month in month out, as long as you keep up to date with your repayments then the bank wants you in there at all costs. Essentially however it's not the bank's call if the trustee decides that there is loads 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 mark the value of your house and the level you owe on the house. A tip if you are attempting to work out the value of your house: use a registered valuer as this will offer 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 house, ensure that you tell the valuer to value the property for a quick sale, see to it you mow the lawn and don't leave the kitchen in a mess also.

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

There are two main reasons this valuation technique is critical to you: one you will have peace of mind ascertaining the market value of your house, and after that you can easily establish your equity position. The second thing is, your property may be worth much more than you thought. Get some tips before doing this. The number of times I've met clients that have sold their family home of 20 years only to find out I could of helped them keep it; unfortunately this happens all too often

When it comes to Bankruptcy and houses, another big consideration is ownership, in most cases houses are purchased 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 doesn't, the equity is only factored on the 50 % of the property.

When it concerns Bankruptcy, this is just one of potentially hundreds of scenarios that are possible 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 should repeat this but get some help on this area of Bankruptcy because it is very tricky 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 call Bankruptcy Advice Australia on 1300 879 867, or visit our website: www.bankruptcy-advice.com.au/

Bankruptcy in Australia-- Who exactly do I talk to?

Should I consult with my accountant about Bankruptcy?

The answer seems obvious doesn't it: if anyone knows your financial situation well in Australia, It's going to be your accountant. However, the short answer is a resounding No! It's not that your accountant will not have your best interests at heart when it comes to Bankruptcy, it's that his abilities lie in helping you save you money at tax time, minimizing your tax liability and lodging your BAS.

Most accounting degrees will put in hardly any to no time on bankruptcy, it's generally performed as a post graduate specialty program for those who intend to work in the field. Unless your accountant is an insolvency specialist, he would not know that a lot about the effects of Bankruptcy, I can guarantee you insolvency specialists know much about tax returns or BAS in. If you do happen to find an insolvency accounting firm in Australia, they often tend to be large firms with very nice office spaces who charge accordingly.

Should I talk to my Solicitor about Bankruptcy?

No! You can speak to your solicitor in Australia but more than likely it won't do you much good. Solicitors are really good at doing things lawyers do, like assisting you do your Will and buying your house and trying to keep you out of court if you're lucky. When it relates to Bankruptcy, the specialists in Australia typically have either a legal or accounting background, and the reason for that is simply that you can't start in the post graduate study to become a qualified insolvency practitioner except if you have a law or accounting degree.

Just as there are a couple of insolvency accounting firms, there are very few insolvency legal practices in Australia, and yes if you choose one you will pay a hefty price for their expertise.

Should I talk to a financial counselor about Bankruptcy?

Yes! There are a lot of financial counselling services to guide you with this, they have no hidden agendas and they're a splendid option for really helping you analyze your situation when it comes to Bankruptcy. If you end up stressing out constantly, not sleeping, not eating or over-eating and thinking of money pressures constantly, then get some help.

There are also charities around Australia like Lifeline that offer a terrific service. They will be a sounding board if you just need someone to talk about with you what your options are. Don't let your financial issue destroy your life - in the end it's just money.

If you like to learn more about what to do, where to turn and what matters to ask about Bankruptcy, then feel free to call Bankruptcy Advice Australia on 1300 879 867, or visit our website: www.bankruptcy-advice.com.au

Bankruptcy in Australia - Choices, Choice, Choices

When it comes to Bankruptcy Australia, there are a lot of choices that we get given depending upon who we are, who we speak to, and what exactly has gone wrong. One of the most common confusion I see with Bankruptcy is when it comes to choosing between Debt Consolidation, Personal Insolvency Agreements, and Bankruptcy itself.

Should I consolidate my debts?

When it comes to Bankruptcy in Australia, a lot of the info you receive on this issue will reflect the interests of the advice giver. Therefore, if you call a debt consolidation provider, I can promise you they will tell you to consolidate your debts. The debt consolidation business is a multi-billion dollar industry making money in one very simple way: charging you a fee for helping you wrap each of your credit card and personal loans into a single neat and tidy package.

I hate to tell you this but these guys won't be doing it free of charge. Please do not misunderstand me: if you believe your financial troubles in Australia may be fixed by paying less interest, then go on and investigate the possibilities. Even a little amount of interest saved over years easily adds up.

Normally I find if you read this blog you've undoubtedly attempted to consolidate your debts already and come to the following realisations like these:

• Your credit rating is not good, and your credit file already has defaults on it so not a single person will give you a loan, consolidated or otherwise,.
• By the time you work it all out, you're so far down a hole that saving on a bit of interest just won't make a great deal of difference,.
• You've probably gotten to the stage where you've had more than enough, you're emotionally burnt out, you can't go on one more day ignoring blocked calls on your phone, ignoring the demands in the mail and so on.

Personal Insolvency Agreements

So when it relates to Bankruptcy in Australia, what's the huge difference between a Debt Agreement and a Personal Insolvency Agreement?

Freedom is the main thing Personal Insolvency Agreements (PIA) have in their favour. They're also administered by a registered and - may I add - regulated trustee featuring the government trustee ITSA, and not a private agency that advertises on TV. Basically this process resembles Debt Agreements (DA): The trustee holds a meeting with the people you owe money to and these experts mediate a deal on your behalf. You can give a lump sum settlement figure or enter into a payment plan, or you can offer them assets instead of cash. This might sound fine when it comes to the troubles with Bankruptcy - that is until you discover that one of the obstacles with PIA's is that 75 % of the people you owe money to need to agree on the deal. If they do not, your proposal is rejected or will need to be renegotiated.

Generally people you owe money prefer all their money back in addition to interest. Sometimes they'll go for less than the amount you owe them - it's typically a percentage of the debt - but allow me to stress this aspect: because of all the variables involved in the negotiation process to put together a PIA its difficult to put a figure on what the people you owe money to will actually settle for.

In most cases you'll have to pay back 100 % of the debt owed. This is not just because your creditors are greedy or have a mean streak, it's because the administrators take 20 % of whatever is decideded upon with the people you owe money to. That applies whether you use a private company for this process or ITSA, the government body setup to administer to these PIAs.

When it comes to Bankruptcy and insolvency I've heard of creditors choosing less 80 % on rare occasions, but that usually only occurs with a public company entering into receivership owing huge sums of money (the kind that makes the news). If you are were owed $10million and you know the people who owe you the money have a team of smart lawyers and some very clever structures in place and they offer 5 % of the debt, you might take it and be grateful. Sadly, ordinary punters like you and me in Australia aren't going to get that lucky!

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 call Bankruptcy Advice Australia on 1300 879 867, or visit our website: bankruptcy-advice.com.au.

Bankruptcy in Australia - Will I lose my business if I go bankrupt?

When people in Australia come to me hoping to speak about Bankruptcy, they are typically full of questions. The internet has lots of information, but far too much of it is baffling or contradicts itself, so I make it my mission to try and make it clearer. One of the very most usual problems is 'Will I lose my business if I declare bankruptcy?' The quick answer is no. If you are an owner of a company any shape or size you can keep your business if you want to. In Australia, businesses that become insolvent have a few options for instance, liquidation, voluntary administration and so on. It's individuals who go bankrupt not companies.

Bankruptcy is a complex area so get some expert advice on this one if you have a business. Generally speaking, the financial debts in a business and personal debts go hand in hand when a business owner declares bankruptcy. There are a few essential implications for directors of companies when it pertains to Bankruptcy in Australia: A bankrupt can not be a director of a company, so if you have a pty ltd company you are going to need to resign as a director soon after you're bankrupt.

A limitation that applies when you are bankrupt as a business owner is that you can be in your own business as a sole trader only. Generally there are things you have to reveal as an aspect of that but generally you can still run your company. For some business owners, bankruptcy affects their ability to run the business because of the licensing issues. As an example, if you run a building company, your license will be suspended once you're bankrupt and therefore you can no longer trade without that license, so make sure you are asking the ideal questions when it involves licenses and Bankruptcy in Australia.

However if your business is not impacted directly by such issues, then you'll will need to restructure the way you run your business. There are considerations when and if you go bankrupt as a business owner: you can not acquire heaps of debt in your company, then go bankrupt and afterwards open the doors the next day like nothing at all had happened. There are laws in place to avoid what is called phoenix companies popping up out of the ashes of an old company.

Having said that, it's just a point of speaking with the suitable people about Bankruptcy. In this circumstance you may believe you need a liquidator for your company, and you could be right, but keep that in mind every liquidator is unique and have their own motives. Liquidators profit from your liquidation - heaps of money - so what advice do you think you will get?

When it comes to Bankruptcy, I think that giving generic advice in this area is likely unsafe as it can have very considerable implications for directors and business owners. This is because it is one of those cases where what the right advice for one business owner is the inappropriate advice for the other. There are some fundamentals however, that you may benefit from. There is no limit to the size of the business you run when you are bankrupt. You can employ staff. You can constantly deal with your manufacturers under certain conditions, the main one being you will need to meet the payment terms agreed upon.

So when it concerns Bankruptcy, don't get overly worried about what you can and can't do as a business owner, just get the appropriate advice ... If you want to learn more about what to do, exactly where to turn and what questions to ask about Bankruptcy, then feel free to consult Bankruptcy Advice Australia on 1300 879 867, or visit our website: www.bankruptcy-advice.com.au/

Bankruptcy in Australia - does it matter if it is voluntary?

When it comes to Bankruptcy Australia, commonly people aren't aware that there can be both voluntary, and involuntary bankruptcy - both have distinct methods and policies.

Involuntary bankruptcy occurs when someone you owe money to applies to the court to declare you bankrupt. Commonly when you get one of these notices, you have 21 days to pay all the debt. If you do not, then the creditor returns to the court and asks the court to provide a sequestration order that declares you bankrupt. A trustee is selected, and then you have 14 days to get the documentation in and after that you are bankrupt.

You can challenge a bankruptcy notice by going to court immediately after the 21 days have expired and put your case forward, to stop it going to the next level. Apart from the way you became bankrupt there is in fact no distinction between Involuntary Bankruptcy and or Voluntary Bankruptcy - once you are simply declared bankrupt, they're managed to in the same way.

However, when it comes to Bankruptcy for this, the stress and anxiety, torment and fear that accompanies this process is incredible. If you think you are more than likely to be made bankrupt by someone, get some assistance and act on that advice. Generally I've found it's always much better to know what you can and can't do before you have somebody bankrupt you. Once you are bankrupt, it's typically too late.

Voluntary Bankruptcy

However, when it comes to Bankruptcy, sometimes there are times that it is the best option. So you may need to ask yourself, 'when should I consider voluntary Bankruptcy?'.

This question is not the very same for everybody of course, but generally I find that one way you could work it out is to figure out how long it will take you to pay each of your debts - if its longer than 3 years (the period you are declared bankrupt), then this may serve to help you make that decision, and help you to understand Bankruptcy.

Once, I had an 80 year old pensioner, who spoke to me once regarding * Bankrupcty tell me that her credit card statement calculated how long her debt would take to pay at the level she was paying her account, and it was 35 years! Imagine 35 years for one credit card bill.

Credit rating damage can help you think this through. If you move house and forget to pay your $30 phone bill for 6 months more, it's very likely the phone company will default your credit file. That default will sit on your file for 5 years, so for $30 you can have your credit file truly damaged for that period of time - and all of this will impact how you have to approach Bankruptcy.

In many ways, the ease with which companies/credit providers can default your credit file is unreasonable. The punishment doesn't seem to match the crime in my book. So if you already have defaults on your credit report for 5 years, bear in mind that bankruptcy is on your credit file for a total 7 years then its erased completely.

So if your credit rating is a big issue in trying to decide whether to participate in a Debt Agreement or Personal Insolvency Agreement or Bankruptcy remember they will all sit on your credit file for a total of 7 years. The biggest difference is that with a DA or PIA you pay back the money and nevertheless have it on your file for 7 years.

Bankruptcy

I have mentioned the word a few times now, but when it comes down to it, Bankruptcy is the biggest part, and the element more people are afraid of when they come to me to talk about their financial situation and Bankruptcy. The other side of crime and punishment equation is bankruptcy, and in this specific country the arrangements are very generous: you can go bankrupt owing millions of dollars and after 3 years it's all finished with no strings attached. As compared to countries like the United States, our bankruptcy laws are very reasonable.

I don't claim to know why that is but a few hundred years ago debtors went to prison. These days I suppose the government thinks the sooner it can get you back on your feet working and paying tax, the better. It makes more sense than locking you up which costs the taxpayer anyway.

Bankruptcy wipes all of your debts including ATO debts except for a few things:.

·         Centrelink Debts, Court Fines like parking and speeding fines.

·         HECS or Fee Help loans.

·         Money to pay for a car accident if the car was not actually insured.

There is far more that can be said about this and Bankruptcy in general but the purpose of this blog was to help you decide between a few possible options. When getting some advice, don't forget that there are always possibilities when it relates to Bankruptcy in Australia, so do some homework, and Good luck!

If you wish to learn more about precisely what to do, where to turn and what questions to ask about Bankruptcy, then feel free to speak to Bankruptcy Advice Australia on 1300 879 867, or visit our website:.bankruptcy-advice.com.au