The Dangers of Being Declared Bankrupt

When it comes to being served with a bankruptcy notice, it is vital to know that failing to take any immediate action can result in severe consequences.  A creditor can apply to a court to have you declared bankrupt in the event that you fail to comply. This is deemed to be an “act of bankruptcy” and this financial state will usually last for 3 years.

So what can you expect once you are declared bankrupt? Lawyer and solicitor Glenn Duker outlines four key consequences.

1. A third party will manage your financial affairs

Once bankrupt, the managements and control of your financial matters will be handed over to a trustee in bankruptcy. This person has the power to sell your assets to pay your debts.

You are required to report any changes in your financial circumstances to your trustee. This includes any changed in your income, or if you have obtained new assets such as prizes or a lottery win. Your trustee can also ask you to hand over your passport. Therefore, if you want to travel overseas, you must first obtain permission from your trustee.

2. Assets may be sold to pay debts

If you have debts, your trustee can sell off your assets to pay out those debts, which means you could lose your home and car.

3. Your employment may be affected

Becoming a declared bankrupt may affect your eligibility to work in some industries.  These professions or trades include lawyers, accountants, real estate agents, builders, plumbers and more. As well, a bankrupt cannot be a director of, or manage, a company without the Court’s permission.

4. Credit rating

Once declared bankrupt, your name will appear permanently on the National Personal Insolvency Index (NPII). NPII is a register maintained by The Australian Financial Security Authority which records information relating to insolvency matters, and it can be searched by the public.

The NPII is typically used by credit reporting agencies to obtain information on individuals. Banks and utility companies will use the resulting credit reports to decide whether they will lend you money. That can make it extremely difficult for a person who has been declared bankrupt to obtain loans or credit in the future, even after the bankruptcy ends.

As bankruptcy can have serious consequences, please seek legal advice from a professional such as lawyer and solicitor Glenn Duker. He will discuss options that may be available for you, including the possibility of applying to a court to have the bankruptcy notice set aside.