Bankruptcy Pros & Cons

Some of the consequences of going bankrupt

Download free: The Good, Bad & Ugly Brochure

The Good

You will be discharged from the majority of your debts and you'll get a fresh start

It will stop harassment by unsecured creditors

It will stop legal action by unsecured creditors to recover their money through the courts

It will stop seizure of goods by sheriff’s officers

It will stop the garnisheeing of your wages and the garnisheeing your bank accounts

It will protect some of your property, including
• Ordinary clothing
• Most household furniture and effects
• Tools of trade (where value under the ITSA threshold)
• Superannuation that has not been accessed prior to bankruptcy
• Life insurance and endowment policies
• Compensation payments for personal injury received by the bankrupt
• Property of a non-bankrupt person who you live with
• Motor vehicle that is not secured or leased and is valued under the ITSA threshold
• Vehicle under finance where equity is under ITSA threshold
• Property held in trusts (get legal advice)
• Wedding rings depending on value
• Defence service loans
• Rural assistance grants(get advice)
Income up to the ITSA threshold is protected

You can travel throughout Australia. Overseas travel is allowed if you have received permission from your trustee prior to travel.

You can operate as a sole trader, under certain conditions

The Ugly

Your credit rating will be affected for 7 years, this will affect your ability to get credit

Your name will be on the National Personal Insolvency Index (NPII) for the rest of your life

You may have trouble getting credit in the future

You may have difficulty getting insurance, this will depend on the insurance policy conditions

It may affect your ability to rent property if the real estate checks your credit listing or you have an adverse TICA listing due to rent arrears

Property that the trustee has vested during the bankruptcy will continue to vest with the trustee after discharge

It can affect employment opportunities.

It can affect your ability to work in certain professions

It may affect your connection to utilities

Warning: this fact sheet is for information only and should not be relied on as legal advice.

We recommend that you visit the ITSA website and read the frequently asked questions, read the prescribed information and fact sheets produced by ITSA

We recommend that you consider the impact upon income, assets, employment and inheritances before you go Bankrupt

As a Bankrupt you will need to live within your financial means

The Bad

Your Bankruptcy will be on the public record

Fraudulent Debts will not be discharged by bankruptcy, for example fraudulent Centrelink debts

It will not clear HELP/HECS debts
It will not discharge child support debts
Unliquidated debts will not be discharged

It will not get rid of fines imposed by the court. Traffic and other infringements may be discharged but their non-payment may cause the suspension of your driver’s license or car registration

Valuables not protected by bankruptcy will be part of the estate administered by your trustee (for example antiques, high value car etc.)

If you have an interest in any real estate this will be part of the estate administered by your trustee

Inheritances (during or prior to your bankruptcy) will be part of the estate administered by the trustee

Gifts and winnings (during your bankruptcy) will be part of the estate administered by the trustee

If your income is over the bankruptcy threshold you will have to contribute to your bankruptcy

You may be required to surrender your passport.

If you breach your bankruptcy obligations your bankruptcy may be extended & there may be penalties

You have to resign as a director of a company

Preferential creditors or undervalued transactions may be subject to trustee investigation