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

The main question people have when they come to us regarding Bankruptcy is usually 'Can I keep my house?' and in many cases the answer is yes, you can manage to keep your house.

The only reason you are going to be forced to sell your family home when you file for bankruptcy is actually because you have so much equity in the home that it is viewed as an asset. Please go over these straightforward hypothetical case studies below to get your head around Bankruptcy and how it affects houses in Australia. Remember If you have to know more about Bankruptcy and houses feel free to consult with us here at Bankruptcy Advice Melbourne on 1300 879 867, or go to our website: www.bankruptcy-advice.com.au/Melbourne.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 because 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 still 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 lately.

Unfortunately 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 particular 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 these people 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 want 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 typically somewhere between $3,000 and $5,000 to cover the legal costs of altering the land title deed etc.

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

Case Study 2. (Bill & Michelle Johnson).

2 years ago Bill and Michelle bought a townhouse in a lovely suburb of Melbourne 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.

Due to 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 apart from the mortgage. Bill cannot pay his debts therefore he is reviewing Bankruptcy. Michelle is concerned that she too may need to declare bankruptcy or be obliged into it because of the house loan.

With this particular case the trustee is required to access or get their hands on Bill's half of the equity which is $50,000 less selling costs. They might 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 particular 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 chance 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 complicated, these two case studies above are just the tip of the iceberg as far as your options in Melbourne are concerned. If you need to know more about Bankruptcy and houses feel free to call us here at Bankruptcy Advice Melbourne on 1300 879 867, or go to our website: www.bankruptcy-advice.com.au/Melbourne.com.au.

Bankruptcy Melbourne, So what is the Deal with Debts?

Which Debts are wiped out if I go Bankrupt?

The quick answer is that when it comes to Bankruptcy most debts are wiped, and I have also included 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) along with any debts arising from uninsured Motor-vehicle claims and educational debts like HECS or FEE-HELP. These debts are not erased when you file for bankruptcy.

What about Secured Debts?

A secured debt is a vehicle loan or a home loan; it is a debt that has some genuine security affixed to it. So as an example 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 removed if I file for bankruptcy?

Yes. If you have a car loan for $40,000 you can have that debt erased if you simply return 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 can be wiped but the asset must be sold or returned. This is just one element that, when it comes to Bankruptcy, it is vital to get professional help - like that available at Bankruptcy Advice Melbourne.

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

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

What about my business or Company debts?

Sometimes when it comes to 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. Typically you may need 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 Melbourne we specialise in business and personal debts so give us a call here at Bankruptcy Advice Melbourne if you have any questions regarding Bankruptcy on 1300 879 867. Or feel free to head to our website: www.bankruptcy-advice.com.au/Melbourne.com.au

Bankruptcy, Will I lose my Superannuation?

Bankruptcy in Australia can be involved and confusing. A question we usually get asked here over at Bankruptcy Advice Melbourne is 'what happens to my super if I apply for Bankruptcy'? The reply for most is straightforward, if your super is simply in a regulated fund or industry fund like Sunsuper or Host Plus then nothing happens; your super is 100 % safe when it comes down to Bankruptcy.

What if I have a Self Managed Super Fund?

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

Remember Bankruptcy Advice Melbourne is not proposing this article is the entire story, if you have any questions feel free to get in touch with us on 1300 879 867. Whether or not you call us or another person it doesn't matter, just please don't walk into bankruptcy blind when it comes to your SMSF in truth we recommend you find 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 going up against bankruptcy, you will be identified 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 each 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 urge you to be familiar with 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 damaging to a SMSF and as you can imagine the process of Bankruptcy for a SMSF is rather convoluted.

How long do I have so as to restructure my SMSF Fund after I'm bankrupt?

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

For starters, the SMSF will have to be restructured. This means that you will have to consider your over-all structure and make sure it is meeting the basic conditions, including having a new trustee that is not dealing with issues with Bankruptcy. The Australian Tax office will offer you a 6 month 'grace period' to get this done before you face penalties. And consider, sometimes the most ideal 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 continuously keeping the ATO informed of what is happening. This indicates you ought 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.

Over 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 Melbourne 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 have to appoint a new director, and it will then be their duty to oversee the sale and transfer of assets into a managed fund. If there are two or more members, than the bankrupt member will need to resign and the other member will remove the property and halve the proceeds. They would then want to decide if they choose to remain as a single member SMSF, or if they would like to roll it all into a managed fund. If both members are entering bankruptcy, then they would need to sell all assets immediately and transfer the liquid assets to the managed fund.

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

A simple solution ...

As I suggested earlier, a basic solution to your SMSF situation 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 getting proper advice is the best first step. If you want to discuss your options further, contact us at Bankruptcy Advice Melbourne or visit our website: www.bankruptcy-advice.com.au/Melbourne.com.au or just give us a call on 1300 879 867.

Bankruptcy in Melbourne- Who do I talk to?

Should I talk to my accountant about Bankruptcy?

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

Most accounting degrees will devote very little to no time on insolvency, it's generally performed as a post graduate speciality program for those who intend to work in the field. 

Unless your accountant is an insolvency specialist, he won't know that a lot about the implications of Bankruptcy, I can assure you insolvency specialists know much about tax returns or BAS in. If you do happen to find an insolvency accounting firm in Melbourne, they have the tendency to be large firms with very nice offices who charge accordingly.

Should I talk with my Solicitor about Bankruptcy?

No! You can talk to your solicitor in Melbourne but more than likely it won't do you much good. Solicitors are certainly good at doing things lawyers do, like helping you do your Will and buying your house and keeping you out of court if you're lucky. When it concerns Bankruptcy, the specialists in Melbourne will have either a legal or accounting background, and the main reason for that is simply that you can't start in the post graduate study to become a qualified insolvency practitioner unless you have a law or accounting degree.

Just as there are a small number of insolvency accounting firms, there are very few insolvency legal practices in Australia, and yes if you locate one you will pay an ample price for their expertise.

Should I talk to a financial counsellor about Bankruptcy?

Yes! There are plenty of financial counselling services to assist you with this, they have no hidden agendas and they're a delightful option for really helping you think through your circumstance when it comes to Bankruptcy. If you are stressing out constantly, not sleeping, not eating or over-eating and thinking of money pressures all the time, then get some help.

There are also charitable organizations around Melbourne like Lifeline that offer a fantastic service. They will be a sounding board if you just need someone to discuss with you what your choices are. Don't let your financial problem destroy your life - ultimately it's just money.

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

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

When people in Melbourne come to me planning to talk about Bankruptcy, they are constantly loaded with questions. The internet has plenty of information, but far too much of it is confusing or contradicts itself, so I make it my mission to try and make things clearer. One of the very most simple worries is 'Will I lose my business if I declare bankruptcy?' The quick answer is no. If you are a manager of a company any shape or size you can keep your business if you would like to. In Melbourne, businesses that end up being insolvent have a few options for example, liquidation, voluntary administration and so on. It's people who go bankrupt not businesses.

Bankruptcy is a complicated area so get some professional advice on this one if you have a business. Generally speaking, the financial obligations in a business and personal debts go together when a business owner declares bankruptcy. There are some crucial implications for directors of companies when it comes to Bankruptcy in Melbourne: A bankrupt can not be a director of a company, so if you have a pty ltd company you will definitely need to resign as a director soon after you're bankrupt.

A limitation that applies when you are actually bankrupt as a business owner is that you may be in your own business as a sole trader only. Certainly there are things you must disclose as a part of that but generally you can still run your business. For some business owners, bankruptcy impacts their ability to run the business because of the licensing issues. For example, if you run a building company, your license will be suspended once you're bankrupt and as a consequence you can not trade without that license, so make sure you are asking the appropriate questions when it comes to licenses and Bankruptcy in Melbourne.

On the other hand 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 rack up heaps of debt in your company, then go bankrupt and then open the doors the next day like not a thing had happened. There are laws in place to avoid what is called phoenix companies growing out of the ashes of an old business.

Having said that, it's just an issue of talking to the suitable people about Bankruptcy. Here in this situation you may believe you need a liquidator for your company, and you may be right, but bear in mind that every liquidator is distinct and have their own motives. Liquidators make money from your liquidation - heaps of money - so what advice do you believe you will get?

When it comes to Bankruptcy, I think that giving generic advice in this area is likely dangerous as it can have very severe implications for directors and business owners. This is due to the fact that it is one of those cases where what the right advice for one business owner is the incorrect advice for the other. There are some basics however, that you may benefit from. There is no reduce 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 extremely upset about what you can and can't do as a business owner, just get the best advice ... If you want 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 Melbourne on 1300 879 867, or visit our website: www.bankruptcy-advice.com.au/Melbourne .

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

When it comes to Bankruptcy Melbourne, normally people aren't aware that there can be both voluntary, and involuntary bankruptcy - both have different approaches and policies.

Involuntary bankruptcy happens when someone you owe money to applies to the court to declare you bankrupt. Normally when you get one of these notices, you have normally 21 days to pay all the debt. If you don't, then the creditor goes back to the court and requests the court to issue a sequestration order that declares you bankrupt. A trustee is selected, and then you have 14 days to get the documents in then afterwards you are bankrupt.

You can contest a bankruptcy notice by going to court right after the 21 days have expired and put your case forward, to stop it going to the next level. Other than 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 conducted to in the very same way.

However, when it concerns Bankruptcy for this, the stress, torment and fear that accompanies this method is incredible. If you think you are prone to be made bankrupt by someone, get some guidance and act on that advice. Generally I've found it's always better to know what you can and can't do before you have a person bankrupt you. Once you are bankrupt, it's typically far too late.

Voluntary Bankruptcy

Alternatively, when it comes to Bankruptcy, sometimes there are moments that it is the most ideal option. So you may need to ask yourself, 'when should I consider voluntary Bankruptcy?'.

This question is not the very same for each person of course, but ordinarily I find that one way you could work it out is to figure out just how long it will take you to pay each one 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 rate she was paying off 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 fail to remember to pay your $30 phone bill for 6 months more, it's very likely the telephone company will default your credit file. That default will remain 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 affect 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 equal the crime in my book. So if you currently have defaults on your credit report for 5 years, keep 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 factor 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 change is that with a DA or PIA you repay the money and nevertheless have it on your file for 7 years.

Bankruptcy

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

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 assumes 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 in turn costs the taxpayer anyway.

Bankruptcy wipes every one 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 take care of a car accident if the car was not actually insured.

There is a lot 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 readily available options. When getting some advice, remember that there are always alternatives when it concerns Bankruptcy in Melbourne, so do some study, and Good luck!

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

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

Bankruptcy Melbourne is a confusing process, and you need to be sure you get the right advice. And when it comes to your income being affected, the answer to the question is maybe. The first thing you have to know about going bankrupt is there is no rule on how much you can earn. However, I will mention that your income is a significant consideration when working through when it comes to Bankruptcy.

The first thing you need to keep in mind about this area of Bankruptcy is just how much 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 sum you earn each year. A dependant is someone who lives with you and earns less than $3,124 per year (regardless of their age).

You can make an application for a hardship variation that raises the threshold amount, if you have costs in Melbourne like medical, child care, substantial travel to and from work, or a circumstance where your partner used to work but is not able to contribute to the family income.

Some of the insightful parts of Bankruptcy is that your employer will not be informed when you file for bankruptcy. Also, Child support is always looked at 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 pay $5,000 child support each year and you have no dependents living with you then your changed net income limit will be $55,332.10.

There are much more issues surrounding income and what is or isn't regarded as income - if you're not exactly sure, it's recommended to get professional advice. The reason you must consider your income as a part of the Big 5 questions here is that bankruptcy is in some cases not an economically sensible option.

If one of your creditors is the ATO (for unpaid taxes), then your tax refund will be taken by the ATO whilst you are bankrupt to contribute 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 caps.

If you think when it comes to Bankruptcy, your situation is more complicated, then simply get expert advice in Melbourne. I may seem like a broken record, but remember that it's always a good idea to work through these options prior to declaring bankruptcy, due to the fact that once you have filed the paperwork it's far too late to change your mind.

If you intend to find out more about what to do, where to turn and what issues to ask about Bankruptcy, then don't hesitate to contact Bankruptcy Advice Melbourne on 1300 879 867, or visit our website: bankruptcy-advice.com.au/Melbourne .