In accordance with the Bankruptcy Act 1989 and the Bankruptcy Rules 1990 you may be able to declare yourself bankrupt if you are unable to pay your debts as the amount you owe is more than the value of the things you own. Going Bankrupt means you are temporarilyno longer liable for most of your debts and you do not have to pay them until you are no longer considered bankrupt.
Bankruptcy does not cover all debts so it is important to make sure you know which of your debts won't be covered (i.e. you will remain liable to repay these debts following bankruptcy) and put plans in place to deal with them.
If you are declared bankrupt you might need to:
If you are considering declaring yourself bankrupt, it is with noting that you cannot usually include a debt in your bankruptcy if you incurred the debt after you went bankrupt. If you forget a debt you incurred before you declared bankruptcy, you can usually include it in your bankruptcy application after ithas been filed with the courts.
If you are declared bankrupt you will likely still have to pay:
The bankruptcy period usually lasts 12 months. If you are declared bankrupt, most of your creditors won’t be able to contact you about your debts or take you to court.
To decide if bankruptcy is right for you, Consumer Affairs advises that, with the assistance of a lawyer and/or financial adviser, you consider:
If you are declared bankrupt,depending on your personal residential living arrangements, you might not have to move from your current home. As part of your bankruptcy proceedings, the courts will consider whether you rent or own your home and who you live with.
If you want to move after declaring yourself bankrupt, Consumer Affairs warns that it might be harder to get a mortgage or a new tenancy for several years as your bankruptcy status can stay on your credit report for 6 years as will likely be considered by future lenders or landlords.
When you declare bankruptcy, you can usually keep the things you need to live (e.g. your clothes and furniture).
The rest of the belongings you own become the property of the official receiver (i.e. the person who deals with your bankruptcy). When ownership of the rest of your belongings passes to the official receiver, this is called being “vested”.
The official receiver can also claim belongings that come into your possession during your bankruptcy and before your bankruptcy ends. The official receiver will look at selling these items in order to make payments towards your creditors.
If the official receiver is allowed to sell some of your possessions in order to repay some of your bankruptcy debts, Consumer Affairs advises that you do not sell the possession at less than market value or gift the possession away; even if you haven’t been declared bankrupt yet. This could be a criminal offence and could lead to you having to follow extra restrictions and/or being prosecuted. The restrictions are called a ‘bankruptcy restrictions order’ (BRO).
After you are declared bankrupt,the official review will allow you to keep enough of your monthly income to cover your day-to-day living costs. You can usually keep your pension as well.
If you earn more than you need for day-to-day living costs, you will be obligated to pay the rest towards your debts. This means going bankrupt can affect:
After declaring bankruptcy your means of generating monthly income will likely be affected if:
If you are employed and/or do not work in the financial sector, you might still experience issues as a result of declaring bankruptcy. Your employer might place restrictions on the kind of work you can do in order to minimize their exposure to any operational risk that may be associated with your bankruptcy.
After declaring bankruptcy you might find it more difficult to get a job in certain industries in the future,such as:
Generally you do not have to tell your employer if you go bankrupt. However, Consumer Affairs advises that you should carefully review the terms and conditions of your contract of employment to confirm whether it says anything about you having to make such a declaration to your employer.
After you have declared bankruptcy you will likely be asked to make monthly payments towards your debts considered in your bankruptcy if you have money left over after having paid your monthly essential expenses (i.e. rent, utilities and groceries). The expenses you need are called ‘essentials’ and ‘reasonable living costs’.
You will not likely have to pay any money towards your bankruptcy debts during the bankruptcy period if either:
However, it is worth noting at this stage that you will likely need to make payments for debts that aren’t part of your bankruptcy (e.g. child maintenance or student loans). If you are not sure what you need to keep paying,see above to confirm which debts are covered by declaring personal bankruptcy.
If your partner is declared bankrupt, you will need to know what will happen to any joint debts you have with them. You may also find that your home and belongings of value are affected by your partner being declared bankrupt.
This section provides information on your right sand options if your partner is considering, or has been declared bankrupt and discusses what might happen to your home and assets and whether you will be held responsible for any joint debts that you may have with your partner.
