Your income

Contrary to what a lot of people think, and what some people try to tell you, whilst you are bankrupt you can earn as much as you like, nobody will try and stop you.

Get on with your life, start putting some money aside for the essentials you have not been able to afford for a while if you can.

To make it simple I’ve set out for you the base amounts that you keep out of your pay whilst you are bankrupt.

The normal period of bankruptcy is three years, plus one day.

These base amounts are called the Income Threshold Amounts which is technical talk for the amount of your net income after tax (and child support if that applies to you) that is always yours.

If you’re in business as a Sole Trader whilst you are bankrupt, then of course it’s also after net (after allowing for tax) and normal cash business expenses.

Your net income might need to be adjusted by your Bankruptcy Trustee to take into account things like salary sacrifice for a car or larger than normal discretionary superannuation payments. Your trustee is entitled to determine your real net income according to the bankruptcy rules.

The Income Threshold Amounts I have have noted here are per person and are adjusted upwards by the government (AFSA) in March and September each year to allow for movements in the cost of living.

With no dependents the net income amount you can earn that is protected by bankruptcy law is $54,736.50 net per annum, i.e. that’s an average of $1,052.63 per week net take home pay.

This is your money and the expectation is you need this amount to cover the cost of living, such as your rent or mortgage, groceries, getting to and from work, medical bills and insurances, running your car or motorbike, that sort of thing. Anything you earn above this amount you split 50/50 with your bankruptcy trustee for the period of your bankruptcy.

Steve and I speak to people sometimes who seem to set out to try to earn just under the threshold amount.

I usually say to them go out and earn as much as you can, make a million dollars if you are able to and be glad that you’re going to have to pay something to your bankruptcy, it will mean you’re getting back on your feet at a faster rate. Your creditors may get a dividend so you are doing the right thing by them and you may be able to put away a few dollars for an overdue holiday which is bound to improve your quality of life.

With 1 dependent at home the net income amount you can earn that is protected by bankruptcy law is $64,589.07 net per annum, i.e. an average of $1,242.10 per week net take home pay. This is your money. Anything you earn over this amount is split 50/50 with your bankruptcy trustee for the period of your bankruptcy.

With 2 dependents the net income amount you can earn that is protected by bankruptcy law is $69,515.36 net per annum, i.e. an average of $1,336.84 per week net take home pay. This is your money. Anything you earn over this amount is split 50/50 with your bankruptcy trustee for the period of your bankruptcy.

With 3 dependents the net income amount you can earn that is protected by bankruptcy law is $71,252.18 net per annum, i.e. an average of $1,389.46 per week net take home pay. This is your money. Anything you earn over that is split 50/50 with your bankruptcy trustee for the period of your bankruptcy.

With 4 dependents the net income amount you can earn that is protected by bankruptcy law is $73,346.91 net per annum, i.e. an average of $1,410.52 per week net take home pay. This is your money. Anything you earn over this amount is split 50/50 with your bankruptcy trustee for the period of your bankruptcy.

With more than 4 dependents at home the net income amount you can earn that is protected by bankruptcy law is $74,441.64 net per annum, i.e. an average of $1,431.57 per week net take home pay. This is your money. Anything you earn over this amount is split 50/50 with your trustee for the period of your bankruptcy.

Quite a lot of the people I speak to tell me their normal weekly income is $800 or $900 or $1,000 after tax per week so the earnings threshold limits in bankruptcy are not a real consideration as they would pay no contributions from their income anyway.

I am always surprised when people who earn $800, $900 or $1,000 a week tell me they considering proposing a Debt Agreement that might cost them $100, $150 or sometimes even $200 a week over many years.

Most times I suggest that going into bankruptcy now and dealing with the problem that way might be a cheaper and more sensible option.

That way they will be able to more easily cover their rent, groceries, car, insurance payments, day to day living expenses. And hopefully have a few dollars left over to spend on themselves or their family.

Sometimes they agree with me, sometimes they don’t.

You should note that these Income Threshold Amounts listed here are per person.

If a husband and wife both need to go into bankruptcy, and say that they’ve got no dependents at home, then they can each earn the threshold amount per week before their bankruptcy trustee can ask for any contribution.

That is more than $2,100 per week after tax for the household, after tax.

Sometimes a husband and wife who are both bankrupt can quickly get back their quality of life once they have gone into bankruptcy.

Remember how I said that I am convinced bankruptcy saves marriages. This is because the arguments about money usually stop the day the bankruptcy applications are accepted.

A few months ago we helped Kaz and Mick in Queensland with their bankruptcy applications. They were both swamped with credit card debt and were taking out short term pay day loans to pay rent.

They don’t have kids in the house any longer. They both are working full time and make around $900 – $1,000 per week each after tax.

Here is what Kaz wrote in an email to Steve about three months after her and Mick’s bankruptcy applications were excepted.

‘Hi Steve,
Just wanting to say a big thank you for all your advice, Mick and I are now officially bankrupt and I have not known this peace of mind for such a long time.
Such a weight has been lifted and we now see a future, still a little bit away but it’s there now, we are starting to make plans for our future instead of worry where we go going to get the money just to survive from week to week.
We can breath.
A big thanks to Helen as well for her help with the paperwork.
Thank You, Thank You, Thank You’

If you have kids at home then for bankruptcy purposes a dependent is a person who lives with the person who is bankrupt and who is wholly or partly dependent upon the bankrupt person for economic support. The dependent can earn $3,473 per year before they cease to be eligible as a dependent.

Don’t overlook the fact that a husband or wife or partner who is wholly or partly dependent on you for economic support can be classed as a dependent.

If you are required to pay bankruptcy income contributions and you don’t pay when you should then your bankruptcy trustee can take steps to legally collect the money you owe. And they may be able complain about your conduct if you consistently refuse to pay.

So my suggestion is pay your contributions on time and the system will work smoothly, as it was intended to.

At the same time, my suggestion is you keep an eye on your contributions (especially in your third year of bankruptcy) so you don’t inadvertently overpay.

Your income

Contrary to what a lot of people think, and what some people try to tell you, whilst you are bankrupt you can earn as much as you like, nobody will try and stop you.

Get on with your life, start putting some money aside for the essentials you have not been able to afford for a while if you can.

To make it simple I’ve set out for you the base amounts that you keep out of your pay whilst you are bankrupt.

The normal period of bankruptcy is three years, plus one day.

These base amounts are called the Income Threshold Amounts which is technical talk for the amount of your net income after tax (and child support if that applies to you) that is always yours.

If you’re in business as a Sole Trader whilst you are bankrupt, then of course it’s also after net (after allowing for tax) and normal cash business expenses.

Your net income might need to be adjusted by your Bankruptcy Trustee to take into account things like salary sacrifice for a car or larger than normal discretionary superannuation payments. Your trustee is entitled to determine your real net income according to the bankruptcy rules.

The Income Threshold Amounts I have have noted here are per person and are adjusted upwards by the government (AFSA) in March and September each year to allow for movements in the cost of living.

With no dependents the net income amount you can earn that is protected by bankruptcy law is $54,736.50 net per annum, i.e. that’s an average of $1,052.63 per week net take home pay.

This is your money and the expectation is you need this amount to cover the cost of living, such as your rent or mortgage, groceries, getting to and from work, medical bills and insurances, running your car or motorbike, that sort of thing. Anything you earn above this amount you split 50/50 with your bankruptcy trustee for the period of your bankruptcy.

Steve and I speak to people sometimes who seem to set out to try to earn just under the threshold amount.

I usually say to them go out and earn as much as you can, make a million dollars if you are able to and be glad that you’re going to have to pay something to your bankruptcy, it will mean you’re getting back on your feet at a faster rate. Your creditors may get a dividend so you are doing the right thing by them and you may be able to put away a few dollars for an overdue holiday which is bound to improve your quality of life.

With 1 dependent at home the net income amount you can earn that is protected by bankruptcy law is $64,589.07 net per annum, i.e. an average of $1,242.10 per week net take home pay. This is your money. Anything you earn over this amount is split 50/50 with your bankruptcy trustee for the period of your bankruptcy.

With 2 dependents the net income amount you can earn that is protected by bankruptcy law is $69,515.36 net per annum, i.e. an average of $1,336.84 per week net take home pay. This is your money. Anything you earn over this amount is split 50/50 with your bankruptcy trustee for the period of your bankruptcy.

With 3 dependents the net income amount you can earn that is protected by bankruptcy law is $71,252.18 net per annum, i.e. an average of $1,389.46 per week net take home pay. This is your money. Anything you earn over that is split 50/50 with your bankruptcy trustee for the period of your bankruptcy.

With 4 dependents the net income amount you can earn that is protected by bankruptcy law is $73,346.91 net per annum, i.e. an average of $1,410.52 per week net take home pay. This is your money. Anything you earn over this amount is split 50/50 with your bankruptcy trustee for the period of your bankruptcy.

With more than 4 dependents at home the net income amount you can earn that is protected by bankruptcy law is $74,441.64 net per annum, i.e. an average of $1,431.57 per week net take home pay. This is your money. Anything you earn over this amount is split 50/50 with your trustee for the period of your bankruptcy.

Quite a lot of the people I speak to tell me their normal weekly income is $800 or $900 or $1,000 after tax per week so the earnings threshold limits in bankruptcy are not a real consideration as they would pay no contributions from their income anyway.

I am always surprised when people who earn $800, $900 or $1,000 a week tell me they considering proposing a Debt Agreement that might cost them $100, $150 or sometimes even $200 a week over many years.

Most times I suggest that going into bankruptcy now and dealing with the problem that way might be a cheaper and more sensible option.

That way they will be able to more easily cover their rent, groceries, car, insurance payments, day to day living expenses. And hopefully have a few dollars left over to spend on themselves or their family.

Sometimes they agree with me, sometimes they don’t.

You should note that these Income Threshold Amounts listed here are per person.

If a husband and wife both need to go into bankruptcy, and say that they’ve got no dependents at home, then they can each earn the threshold amount per week before their bankruptcy trustee can ask for any contribution.

That is more than $2,100 per week after tax for the household, after tax.

Sometimes a husband and wife who are both bankrupt can quickly get back their quality of life once they have gone into bankruptcy.

Remember how I said that I am convinced bankruptcy saves marriages. This is because the arguments about money usually stop the day the bankruptcy applications are accepted.

A few months ago we helped Kaz and Mick in Queensland with their bankruptcy applications. They were both swamped with credit card debt and were taking out short term pay day loans to pay rent.

They don’t have kids in the house any longer. They both are working full time and make around $900 – $1,000 per week each after tax.

Here is what Kaz wrote in an email to Steve about three months after her and Mick’s bankruptcy applications were excepted.

‘Hi Steve,
Just wanting to say a big thank you for all your advice, Mick and I are now officially bankrupt and I have not known this peace of mind for such a long time.
Such a weight has been lifted and we now see a future, still a little bit away but it’s there now, we are starting to make plans for our future instead of worry where we go going to get the money just to survive from week to week.
We can breath.
A big thanks to Helen as well for her help with the paperwork.
Thank You, Thank You, Thank You’

If you have kids at home then for bankruptcy purposes a dependent is a person who lives with the person who is bankrupt and who is wholly or partly dependent upon the bankrupt person for economic support. The dependent can earn $3,473 per year before they cease to be eligible as a dependent.

Don’t overlook the fact that a husband or wife or partner who is wholly or partly dependent on you for economic support can be classed as a dependent.

If you are required to pay bankruptcy income contributions and you don’t pay when you should then your bankruptcy trustee can take steps to legally collect the money you owe. And they may be able complain about your conduct if you consistently refuse to pay.

So my suggestion is pay your contributions on time and the system will work smoothly, as it was intended to.

At the same time, my suggestion is you keep an eye on your contributions (especially in your third year of bankruptcy) so you don’t inadvertently overpay.

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