Personal Insolvency

At BCR Advisory we offer personal insolvency services. We manage the process with care and understanding. While every individual’s situation is different and needs to be considered on its own merits, there are upsides and downsides to filing for bankruptcy that must be understood before choosing the insolvency path.

Allowances in bankruptcy

When an individual files for bankruptcy in order to move on from a position of often crippling debt, they will keep their:

  • Household furniture and effects
  • Equity in motor vehicles to the value of $7,700
  • Tools of trade to the value of $3,750
  • Superannuation (subject to the avoidance provisions)
  • Net income (after tax) of $55,446 per annum, and up to $75,406 per annum if the debtor has over four dependants. A dependant includes those receiving income of less than $3,514 per annum. Income exceeding the threshold is subject to a contribution payable of 50% after tax. (These amounts are indexed)

Many individuals believe they will automatically lose their house in the event of bankruptcy. There are many instances where a bankrupt person has been able to retain their residence by the purchase and transfer of the property to a spouse or partner for consideration. Where there is no equity in a property, and if the bankrupt person is able to maintain the mortgage payments, they are likely to be able to retain the property at the secured creditor’s discretion.

There is also legislation in place to prevent further contact by creditors. Almost all creditors of the debtor will be handled by the Trustee in Bankruptcy. Many bankrupt people find that no longer having to deal with creditors, far outweighs any potential disadvantages of becoming bankrupt.

Considerations of bankruptcy

On the downside, when an individual chooses to file for bankruptcy they are likely to be challenged by:

  • Poor credit ratings
  • Difficulties in obtaining insurance
  • Potential travel restrictions
  • Inability to maintain directorships
  • Limitations in relation to some occupations
  • Stress, which can affect their personal (and family unit’s) health and wellbeing.

Each of these factors are likely to impact on the individual into the longer term and are important considerations when considering filing for bankruptcy.

The alternative may be to consider a Personal Insolvency Agreement (formerly known as a Part X).

Similar to the effect of bankruptcy but resolved in just over a month.  The main issue here is having a necessary incentive for creditors to accept a delayed or reduced payment in exchange for a release from the liabilities.  The process also requires funding to facilitate the necessary report to creditors and the holding of a meeting with the creditors.

Everyone’s circumstances are different. It is important to discuss each set of circumstances with someone experienced in personal insolvency to receive a professional and balanced.

Please contact Gregg to discuss your circumstances.