Bankruptcy – 5 Critical Facts
For years now people who find themselves in serious financial trouble can declare bankruptcy to rid themselves of overwhelming debt. Generally bankruptcy is viewed as a last resort mainly due to the stigma and shame associated with the idea of filing for bankruptcy.
One of the challenges for anyone considering bankruptcy is getting the right information, there is plenty of misinformation circulating online and in the vicinity about bankruptcy but facts seem harder to come by. For those of you who may be considering bankruptcy I will just outline a few key facts so you can make an informed choice. Often one of the problems with bankruptcy advice is there is often more to the story than first meets the eye, so I will highlight a simple and well known fact then give you some additional insight behind that fact that will help you know more about it.
Fact 1. Bankruptcy lasts 3 years.
While this is generally true, it's possible to have your bankruptcy extended to 5 years or even 8 years if the trustee does not get provided with the information that is required of you while you are in your first 3 years. There are potential 50 reasons your bankruptcy could have extended, and in some cases it's simply not filling in some required paperwork while you are bankrupt.
Fact 2. I will lose my assets when I file for bankruptcy.
You may lose some assets when you are bankrupt, but you will not lose your household furniture and general household items. You may lose your house if there is plenty of equity in the property, you may also lose your car if the car has an asset value over $ 7,700. Your business if you are self-employed may also be viewed as an asset. Put simply if you are not sure, then get some advice about your assets.
Fact 3. I will lose my business if I file for bankruptcy.
Remember the job of the bankruptcy trustee is to sell your assets and give the money to your creditors. What really matters in the case of a small business owner is the asset value of a particular business. For example if a plumber needs to file for bankruptcy, it's very likely his hand tools and old ute (that's worth less than $ 7,700) or has finance on it he will be able to keep and continue to run his business, because the real asset of The plumbing business is the plumber himself.
Naturally if the plumber was a company director then he would need to resign and trade as a sole trader moving forward into bankruptcy, but it's not automatic that you will lose your business if you file for bankruptcy.
Fact 4. I will lose my house when I go bankrupt.
Not necessarily, in fact often if there is little to no equity in the property then it's possible to keep the house as long as you keep making the mortgage payment for your bankruptcy term. At the end of the 3 years your house will need to be re-valued, and then you can make an offer representative of any capital gain that has occurred in the 3 years to the trustee and pay that increase and you can have your house back .
Fact 5. I will lose my job when I file for bankruptcy.
There are very few professions you can not do while you are actually bankrupt. Sometimes the restrictions in employment apply more to getting into the field rather than once you are already in there. For example, it's difficult to get into the police force as an undischarged bankrupt, but if you are already in the police force (as long as your bankruptcy was not due to fraud or illegal activities) then you will not be affected by bankruptcy.