When you declare bankruptcy, you are wiping as much debt as you can from creditors to whom you owe money. Your bankruptcy trustee will act as an in-between in this compromise and help you settle your debts by selling or transferring your assets to the creditors. It’s a common myth that if you declare bankruptcy, you’ll lose everything you have. In fact, quite a few of your assets are protected, and your trustee should work on your behalf to get you in the best financial position through the bankruptcy process.
Assets You Can Keep
Most personal household items, such as furnitureMotor vehicle/s up to the value of $7,500 (indexed amount) you use primarily as means of transport (excluding any finance owing on the vehicle/s) section 16 of the Bankruptcy Act
Any tools of your trade up to the value of $3,650 (indexed amount) you use to earn an income (s 116 of the Act)
Assets held on trust (e.g. a family trust or child’s bank account)
Life insurance policies
Compensation you received from a personal injury claim, and any assets you bought with that compensation
Your life insurance policies (as well as your spouse’s), and any proceeds you received from these policies after you were declared bankrupt
Awards with sentimental value, such as sporting and cultural medals or trophies
Most balances and payments you received from regulated superannuation funds on or after the date you were declared bankrupt.
Assets You Will Likely Have to Sell
- Any house or land you own (although you may get to keep your family home in some circumstances)
- Stocks and shares
- Valuable furniture and jewellery
- Gifts and inheritances received under a will
- Motor vehicles and tools of your trade that go over the threshold limit.
Your bankruptcy trustee will help you determine exactly what you can keep, and assist you in the process of selling qualifying assets. Bankruptcy is not the end of the world, even if you lose valuable assets. It’s important to prioritise regaining financial stability over existing assets.
Our qualified staff at Lanyana Financial Group can go over all of your options with you after a free debt assessment. If you reach a debt agreement or personal insolvency agreement, you may be able to avoid losing assets to the extent of declaring bankruptcy.
Speak to a registered bankruptcy trustee today to learn more about your options for dealing with personal insolvency. Call us at 1800 534 534.