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 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 - 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 - 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

Bankruptcy in Australia - Will my income be changed if I go bankrupt?

Bankruptcy Australia is a complicated process, and you ought to ensure you get the right suggestions. And when it comes to your income being affected, the answer to the question is maybe. The first thing you need to know about going bankrupt is there is no limit on how much you can earn. However, I will point out that your income is a serious consideration when working through when it comes to Bankruptcy.

The very first thing you need to understand about this area of Bankruptcy is the amount you can earn before you start paying back money to your creditors via your trustee (see table below).

Net income is the pre-tax/ in the hand quantity you earn annually. A dependant is someone who lives with you and earns less than $3,124 per year (regardless of their age).

You can get a hardship variation that raises the threshold amount, if you have costs in Australia like medical, child care, considerable travel to and from your job, or a scenario where your partner used to work but is not able to support the household income.

Some of the informative parts of Bankruptcy is that your employer will not be alerted when you file for bankruptcy. Also, Child support is always taken into consideration in bankruptcy, if you receive child support that is not factored in as income. If you pay child support this will be also thought about, for example if you provide $5,000 child support each year and you have no dependents living with you then your modified net income limit will be $55,332.10.

There are more issues involving income and what is or isn't thought of as income - if you're uncertain, it's a good idea to get skilled advice. The reason you need to consider your income as a part of the Big 5 questions here is that bankruptcy is in some cases not an economically viable option.

If one of your creditors is the ATO (for unpaid taxes), then your tax refund can be taken by the ATO whilst you are bankrupt to chip in toward your tax bill. If you don't have a tax bill then you will keep your tax refund provided that doesn't take you over your threshold income limits.

If you think when it comes to Bankruptcy, your situation is more intricate, then feel free to get qualified advice in Australia. I may sound like a broken record, but bear in mind that it's always a good idea to work through these options before declaring bankruptcy, since once you have filed the paperwork it's too late to change your mind.

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

Bankruptcy in Australia - Changes that help Small Business and Entrepreneurs

 Do you have an idea of how much Bankruptcy Australia is changing? The Australian Government at the end of 2015 put forward some innate changes to the Bankruptcy Laws in Australia. The most significant of these is the length of time that a person is bankrupt for. At the moment, there is a minimum amount of time that you must continue to be bankrupt, but, this 3 year period may in fact be reduced down to just 12 months. So if you are asking about Bankruptcy, this news may be somewhat important to you.

Mark Carnegie in the Financial Review on the 7th December 2015 recommended that "the proposed changes to ease the burden of bankruptcy laws didn't go far enough and the government should adopt US-style laws to protect the family home".

These changes to the issue of Bankruptcy will take 18 months to implement. Mr Carnegie, went on to say in the Financial Review that defending family assets was very important because "banks just terrorise small business and the mental health consequences to society are enormous".

The problem is Australia's bankruptcy laws deterred investors from supporting start-ups, and as a result mentoring had been "driven out of the system".

"They naturally find it very intimidating themselves personally and with their assets at risk in a risky early-stage deal, but with their own money in the deal and a lightened-up provision I think we 'd probably see more willingness. It could be more important than the money."

Fraudulent Behavior

The controversy surrounding this Bankruptcy issue in Australia that some come up with is that this variation will only reinforce fraudulent behavior opening pandora's box so to speak for the unscrupulous to exploitation of the bankruptcy system. We have taken a look at the minimum, but on the other side of the issue, The government is not proposing to change the maximum term of 8 years if it deems a bankrupt has behaved in an unethical or fraudulent way, and there are no proposals to change the implications of misrepresenting yourself or financial situation when filing for bankruptcy in Australia.

As a bankruptcy professional in Australia, I have a fair share of knowledge when it concerns Bankruptcy. And having dealt with countless bankruptcy cases in Australia I have never caught someone abusing the system or acting in a reckless way as to exploit the insolvency laws in Australia. When it comes to Bankruptcy, each week I help a small business owner or entrepreneur suffer through the very hard task of bankruptcy, not once have I really felt they are happy about it. The normal small business owner or entrepreneur in Australia does not start out taking enormous financial risks with the intention to fail. The media prefers citing the apparent injustice that will be rampant if these changes occur, what a joke!

A Win for Small Business

These suggested changes will be good for often the most effective and brightest in Australia not get rejected of the game financially for financial decisions often out of their control. Most small business owners I help with Bankruptcy, are hardworking, tax paying, companies keeping this country going.

There really is a fine line with the things the government is trying to do here, because they are trying to balance helping individuals who have made decisions out of their control, and preventing people from making blunders that land them in trouble and consequently an issue of Bankruptcy. However you likewise don't want to destroy the experience and knowledge that business owners have. You undoubtedly don't want to shatter people simply because they have had a sincere failure in a large or small start-up project that has not gone well.

At the major end of town large established companies have long been criticised for their failure to innovate - lets face it they would be more likely to do so if the risks of bankruptcy were minimized because directors are troubled they'll be personally liable in an insolvency arrangement if the new endeavor doesn't work out.

The government's proposed 'safe haven' changes for directors of companies will enable Australia to more fully explore and innovate, which will make big changes for Bankruptcy. I can not imagine, that these refinements will be harmful to Australia's economy, indeed these bankruptcy laws will save the tax payer in all areas of health - Especially in the mental health sector because the emotional cost of bankruptcy is extensive. When it comes to Bankruptcy in Australia not a day goes by where I don't find out the tragic stories of relationship failures, thoughts of suicide and the list goes on.

Bankruptcy helps save lives, and it could save yours. If you want some help with your debts in Australia or are just thinking of Bankruptcy, feel free to contact us here at Bankruptcy Advice on 1300 795 575, or visit our website:bankruptcy-advice.com.au

Bankruptcy in Australia - Are you going to get bitten?

When people in Australia ask me about Bankruptcy, I let them know the timeless Native American Fable of the little boy and the Rattlesnake. An old rattlesnake asks a passing young boy to carry him to the mountain top to view one last sunset before he dies. The boy was hesitant, but the rattlesnake vowed not to bite him in exchange for the ride. They travelled together only for the snake to in the end bite the boy despite his assurance not to do so. The snake's reply was 'You knew what I was when you picked me up.

Acquiring the right financial advice in Australia when it pertains to Bankruptcy is a great deal like that little boy's experience, fraught with risk and danger, and normally skewed for the benefit of the person giving the advice. Often you'll get bitten unless you know what you've picked up before you move forward (avoid the rattlesnakes). I learned the problem with obtaining financial advice as a teenager, and it has been fundamental to Bankruptcy. I'd been keeping my nose to the grindstone for a few years, and saved up a small amount of money I wanted to invest. It was the early 1980s so interest rates were fairly high and investing your money was rather profitable. I spent a long time researching diverse investment options, and I went to visit a few financial advisors. It was transparent that they had more money than I did: they had great suits and plush offices, they all seemed to exude confidence and have all the answers. What struck me was that they all had a very different idea of what I should do. This frustrated me so much that it put me off the entire idea of picking any of them.

I'm sure currently you have read enough on the internet to be totally puzzled about Bankruptcy and just what to do. It would most likely be easier for me to help you understand the nature of the financial snakes you could be grabbing while you are attempting to get to the bottom of your financial issues in Australia. Basically, you need to try and figure out what your overarching alternatives are, do your very own research into where to proceed with your plan for Bankruptcy, and then approach the things you feel is best in Australia for your requirements. Essentially, you have 3 options for who to turn to.

The first option is a Solicitor - This may feel like the go-to solution when you appear to be in trouble. But generally there is only just so much support they can give on this matter. There are certainly specialist legal advisors in bankruptcy, but their expertise comes along with a hefty price.

Another possibility you may think about is your accountant - they are incredibly useful and vital to the process of running your business, but for the most part, when you are thinking about Bankruptcy, your accountant won't be much help to you anymore.

Your best bet? A Financial Counsellor that can outline debt consolidation, personal insolvency agreements, and basically all you need to know when it comes to Bankruptcy.

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