Personal insolvency is a growing market with more and more people declaring bankruptcy or entering into other personal insolvency arrangements to address credit issues arising out of consumer credit, business related debt or over leveraging problems, amongst other things. In this post, we seek to address some common misconceptions about bankruptcy, in order to empower people to make decisions about their personal insolvency in a more transparent way.
Misconception 1: You will lose your Job
You will not necessarily lose your job because you become bankrupt. There is no doubt that bankruptcy precludes individuals from holding certain public and private offices and titles, it does not necessarily however preclude one from paid employment even at executive levels.
Misconception 2: Everyone will find out
Though it is true that there is a national register recording personal insolvency statistics and statuses, it is not a commonly reviewed register and everyone you know will not necessarily find out you are bankrupt, unless you otherwise disclose it to them; either because you would like to or because you are required to by law.
Misconception 3: I will lose my house
It is true that a trustee in bankruptcy has the capacity to call in the equity in your home to satisfy your creditors however this does not mean you will necessarily need to sell your house. You may be able to with the support of family members refinance to ‘cash out’ such equity or otherwise you may not have enough equity in your home to make the exercise commercially worthwhile.
Misconception 4: Bankruptcy will ruin my credit rating
There is no doubt that bankruptcy will temporarily impact your credit rating, however such statistics will only stay on your credit record for 7 years. With careful planning and family asset protection, you can recover from bankruptcy quite successfully.
It is vital that you obtain personal and detailed legal advice before declaring bankruptcy.
Though the process has become streamlined and more accessible in recent years, it is key that individuals understand not only their legal rights but the likely practical effects of bankruptcy moving forward. Our friendly team of Insolvency Professionals can assist you to better understand your rights and the process involved.
About the Author
Stipe Vuleta is a Director at Chamberlains (www.chamberlains.com.au) specialising in insolvency, reconstruction and debt recovery. He is an author in the Bankruptcy and Insolvency space, an Associate Adjunct Professor of the University of Canberra and a Professional member of ARITA and the Law Council of Australia’s Insolvency & Reconstruction Committee.