What will happen to my assets if I file for bankruptcy?
When you become bankrupt, a trustee is appointed to administer your bankruptcy. This may include selling certain assets for the benefits of your creditors. Assets are anything of value you own at the time of becoming bankrupt and anything you buy or receive or become entitled to during your bankruptcy.
The Bankruptcy Act allows you to keep certain assets. These include:
• Most ordinary household items
• Tools used to earn income up to an indexed amount (currently $3,550)
• Vehicles (cars and motorbikes) where the total value of the vehicles minus the sum owning under finance is no more than the indexed amount
• Life insurance policies for you and your spouse, and the proceeds from these policies received after your bankruptcy (currently $7,200)
• Assets held by you in trust for another person (for example, a child’s bank account)
• Most balances in regulated superannuation funds and payments from regulated superannuation funds received on or after your date of bankruptcy.
What assets will the trustee sell?
Your trustee will recover any assets regardless of whether they are overseas or in someone else’s possession, with the exception of the assets you are allowed to keep. Examples include:
• Houses, apartments, land, farms and business premises ( including leases)
• Motor vehicles (other than exempt ones)
• Shares and other investments (including shares held in your employer’s business)
• Tax refunds for income earned before you became bankrupt
• Proceeds of a deceased estate where the person dies before or during your bankruptcy
• Lottery winnings and other competition prizes.
What about assets I own with someone else?
If you have a share in an asset with someone else, for example a house, your share of the asset vests in the trustee, and the trustee can sell your share. If the co-owner is not bankrupt, the trustee may agree to sell your share to them for market value.
What about secured creditors?
Examples of secured assets are:
• A house subject to a mortgage with a bank
• A motor vehicle subject to a bill of sale
• Goods under hire purchase, chattel mortgage, lease or bill of sale with a finance company
• Real estate subject to a charge by local councils for outstanding rates or water charges.
A secured creditor cannot take possession of an asset just because you are bankrupt. However, if you fall behind in your payments, they can take and sell the assets (regardless of whether you are bankrupt or not).
Here at The Quinn Group, our team of Lawyers and Accountants can provide you with advice and assistance in regards to the bankruptcy process. If you are struggling with your debts and want to file for bankruptcy, we may be able to provide you with some alternatives or help make the process as easy as possible for you. Contact us now on 02 9223 9166 or submit an online enquiry form.