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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. The Government are looking at changing it to 1 year 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 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 $55,837.60 net per annum, i.e. that’s an average of $1,073.80 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. If your bankruptcy becomes for only 1 year then you may still have to pay contributions for 3 years, we’ll have to wait and see.

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 $65,888.37 net per annum, i.e. an average of $1,267.08 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 $70,913.75 net per annum, i.e. an average of $1,363.73 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 $73,705.63 net per annum, i.e. an average of $1,417.42 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 $75,939.14 net per annum, i.e. an average of $1,460.37 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 $3,560 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, and so extend the period of your bankruptcy to 5 years or 8 years.

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.

Bankruptcy and Cars

People ask us all the time, “Will I lose my car if I file for bankruptcy? How can I keep it?

It has been more than fifteen years since I have come across anyone who lost their car as a result of going into bankruptcy.

The bankruptcy system is designed to protect your car or motorbike and the way the system works makes it simple in practice to keep a car or motorbike that is under finance.

If you are bankrupt the law says you are permitted to own a car (or cars), a motorcycle or motor scooter worth up to $7,800.

This $7,800 is at market rate.

If you owe money on the car or bike, the $7,800 is your net equity in the vehicle after deducting what you owe to the bank or finance company.

If the vehicle is owned in joint names and you both go into bankruptcy, then wholesale the vehicle can be worth $15,600 and be protected by bankruptcy law which is $7,800 twice.

Say you own a car that is worth about $20,000 (wholesale) and you still owe $16,000 on it to a finance company. The finance company would likely have a legal claim in the form of a mortgage (or something similar) over the car as their security.

In that scenario then your net equity in the car is the $4,000 which is $20,000 minus the $16,000 owed to the finance company.

As $4,000 is below the $7,800 value that you are permitted, then your trustee does not have a claim against your $20,000 car, it’s safe. In a case like this, if you are up to date with your repayments when you go into bankruptcy, and can stay up to date while you are bankrupt, then you’d be able to keep the car even though you are bankrupt. This is probably the most common scenario. Most people Steve or I talk to continue to maintain payments on their car and they don’t seem to have issues.

Occasionally we speak with people who own a car worth a lot more than $7,800. For example the car is worth about $20,000 wholesale mentioned above, but the car had no finance secured against it. For bankruptcy purposes the car is worth $20,000. In this type of situation your bankruptcy trustee could require that the car be taken to an auction house and sold.

If that happened then the Trustee would then be required to return $7,800 from the proceeds of the sale to you so that you could buy yourself another car.

The $12,200 balance (less any sales costs and commissions) would go into your bankruptcy estate which would be an asset that could meet trustee and administration costs and / or become a dividend for creditors.

If you have a car where you think the trade value is a lot more than $7,800 then in some cases your bankruptcy trustee may allow somebody on your behalf to pay the estimated difference back into the bankrupt estate and so then the trustee does not have to sell the car. It would cost money but there is an opportunity for the car to be saved.

If this sounds like you then give us a call and we can discuss whether this may be viable for you.

To get an idea of what your car’s wholesale value might be, I suggest that you enter ‘cars, wholesale prices’ in your internet search engine and check out in a few of the sites what your car might be worth.

Keep in mind that for bankruptcy purposes it’s probably not worth what the dealers are asking retail customers to pay or what it’s insured for. A mud map value would be retail less about $4K to $5k

What I have noticed over the years is that people routinely think their cars are worth a lot more than a dealer would actually pay. You might be surprised at just how little your six or seven year old car really is worth, even through it is still a great car.

Some people chose to hand back cars that are financed to the financier when they claim bankruptcy. The car may be too expensive to continue on with or maybe it is no longer required. Your bankruptcy status will protect you which means the finance company can’t then ask you to pay any more repayments, or make up losses that they might incur after they have sold the car.

What seems to happen is people who are bankrupt don’t lose their cars because they are bankrupt, quite the contrary, having no other problem debt to pay seems to be a big help in being able to afford to keep up to date with regular car finance payments.

Travelling overseas

The question we get asked all the time is “Can you travel overseas if you are bankrupt in Australia?”

The truth is that being bankrupt does not usually prevent you from travelling overseas.

You just have to apply to your bankruptcy trustee for permission to take the trip. You’ll get the permission in any normal circumstance, even for a holiday. There is a form to fill in for your Trustee.

From 1st April 2014 the Government (AFSA) charge $150 to apply for permission to travel overseas whilst bankrupt and this would appear to apply only if AFSA are providing the Trustee service.

Private Trustees also require you to fill in a form or write a letter providing travel details, but as far as I am aware private trustees don’t seek to charge a fee for providing permission to travel.

I thought I would share with you part of a thank you email that arrived in May 2014.

At the moment this lady is still proceeding through her bankruptcy, most importantly she’s getting back on her feet and on with her life, and has been to the UK to see her children. In this case being bankrupt did not affect  her plans to travel overseas to visit her family.

“Dear Fred,

I would like to say a big thank you for yours and Helen’s help in my case. Life is so much nicer now for me. I have been able to save money and go and see my children in the UK, that was the greatest thing.”

People always tell me they have been told by a Debt Collector or someone trying to sell a debt agreement that they can’t travel overseas if they go into bankruptcy. This is just old fashioned scaremongering. Scaremongering happens all day every day in most areas of life. It is a fact of life. My suggestion? See it for what it is and rise above it.


You may have read in other Bankruptcy or Debt Agreement websites, probably as a bit of a put down, that if you are bankrupt you may have trouble renting.
Note that the word ‘may’ is used, not the word ‘will’.

I have also noted that these same websites tend to really try to push you towards a Debt Agreement solution.

The first thing to note that if you enter Bankruptcy or use a Debt Agreement your credit rating shows a Bankruptcy event either way, for a period of five years.

The implication from these other websites seems to be that it would be preferable to be in a Debt Agreement when applying for a rental property than being in Bankruptcy. I doubt it makes any difference one way or the other.

Yet in all the years I have been assisting people with Bankruptcy and Debt Agreement situations I never gets calls or have been provided feedback saying that renting is problematic because a person is either Bankrupt or in a Debt Agreement.

The secret seems to be, be a good renter. Have a decent income. Have your living expenses under control, these are all things you are in control of.

What we hear all the time is that a landlord is more interested in what your previous landlord’s agents will say about you and your payment record than what might or might not be on your credit rating.

Use your common sense. If you are planning to go into bankruptcy shortly then it would make sense that the landlord and utility service providers are paid up to date.

They then won’t appear as creditors in your bankruptcy and would never even know you are bankrupt. It is probably not a good idea to run up the remaining space on your credit card to do any of this though, use your common sense and you will be fine.

Being Self Employed

Whilst you are bankrupt you can’t be a company director or secretary for the term of the bankruptcy.

However, whilst you can’t be a company director during bankruptcy you are permitted to operate the simplest business structure available in Australia called a Sole Trader which comes with a personal ABN.

If you want to be self employed during the three years of your bankruptcy the government requires that you trade in your own name as a Sole Trader.

If you trade in your own name then you are not required to inform anyone that you do business with that you are bankrupt, unless you are seeking credit from them of more than $5,647.

If you currently have an existing Sole Trader ABN then you carry on using that. If you use a trading name or business name rather than your own name then bankruptcy law might place you under an obligation to tell all the people that you do business with that you are currently bankrupt.

Most people prefer to keep their bankruptcy status private and from what I have seen most people can trade in their own name without much difficulty.

A practical way of operating on your website or a business card. On it, top line, goes your name, Fred C. Bloggs. On the second line, describe what you do, Coffs Harbour Lawn Mowing and Rubbish Removal.

Now you’re trading in your own name, and that’s an advantage because people like to know who they are dealing with and at the same time you have described what you do.

Another suggestion is the second line of the card may advise who you previously were, so as to identify you to that business. In the Fred C. Bloggs case the second line would say, (previously Coffs Harbour Lawn Mowing and Rubbish Removal).

To any raised eyebrows you could simply say ‘taxation reasons‘ or ‘divorce settlement‘ or ‘accountant suggested it’, something like that.

That’s generally sufficient, it will probably get an understanding nod.

Tools of Trade

Tools of trade to the value (second hand or auction value) are safe if you are bankrupt up to a limit of $3,750.

In reality tradies don’t tend to lose their tools of trade if they need to go into bankruptcy. Most painters, carpenters and bricklayers tools would not be worth $3,700 second hand if they were sitting in a job lot on the auction room floor.

Sometimes gardeners and mechanics have valuable mowers, car hoists or vehicle diagnostic equipment that is worth a lot more than $3,700, even second hand. Farmers usually have tractors, trailers, ploughs, seeders and harvesters that are often worth tens of thousands of dollars.

It is not a foregone conclusion that valuable equipment like this would need to be surrendered in bankruptcy, in some cases the bankruptcy trustee may allow somebody, like a trusted friend or family member to pay the estimated difference back into the bankrupt estate and so then the trustee does not have to sell the equipment.

The outcome would then be your business should be able to then operate as normal with all the normal gear. So be assured there is an opportunity in bankruptcy for the valuable equipment to be dealt with in a civilized, commercial manner.

Of course it helps to have a sensible Trustee ready to go before you claim bankruptcy. If this sounds like you then give us a call and we can discuss whether this may be viable for you.

To get an idea of what your tools of trade wholesale value might be I suggest that you call a licensed dealer or call your local auction house. They should be able to provide guidance.

Tax Debt and Outstanding Tax Returns

Once it is in place then your bankruptcy will cancel your tax debt for income tax and GST, whether or not you’ve lodged all of your tax returns at the time of entering bankruptcy or not.

Whilst the tax debt itself will be dealt with please remember you still are required to prepare and lodge any outstanding business, GST or personal tax returns, either now or after your bankruptcy is put in place.

What I have seen over the years is that some people bring all their outstanding business and personal tax returns (and BAS returns where applicable) prior to going into bankruptcy and others do so in the first few months after their bankruptcy is in place. The final outcome for you is the same.

Quite a few people we assist have been self-employed for many years and often their tax affairs have got out of hand.

Mostly they are Sole Traders or they operate a husband and wife Partnership. Sometimes the partnership, BAS and personal tax returns have not been completed or lodged for the past three, four or five years, occasionally a lot longer.

We assisted a guy a few months ago who had not lodged Tax Returns for about 14 years! The requirement to lodge Tax Returns is the law and this applies to you whether you are bankrupt or not. The bankruptcy simply takes care of tax debt itself if it is unmanageable and genuinely can’t be paid.

Quite often the people we speak to have lost contact with their Accountant years ago, often they owe the last Accountant money. Sometimes they say it was the Accountant’s poor advice or tax work that contributed to their problem.

Whatever the circumstance the fact remains that personal, business and BAS returns do need to be lodged with the ATO either now or shortly after the bankruptcy claim is put in place.

Otherwise you would risk prosecution and a possible heavy fines imposed by the Court (that probably would not be cancelled by your bankruptcy). Where I have seen successful prosecutions and fines imposed by the Court for non-lodgment of tax returns they are usually $20,000, $30,000 or more together with a court order to lodge all outstanding tax and BAS returns by a certain date.

It probably goes without saying that is not ideal to be prosecuted and fined in the court and be subject to a court order to get all your outstanding tax returns up to date so you can then go into bankruptcy.

It is much easier (and cheaper and less stressful) to stay in front of events and get your tax affairs in order before action is taken against you. That way you can go into bankruptcy at your own timetable in an orderly and legal manner.

You might be under a lot of pressure from your creditors right now and have years of outstanding business and personal tax returns outstanding. For example, you may have the ATO on your back either threatening or having just started collection or enforcement proceedings for money owed to them or you may have business or personal debt all about to go legal.

If this sounds like you then might be better for everyone if you claimed bankruptcy immediately and then bring your outstanding tax returns up to date in the first 4 to 8 weeks after your bankruptcy has been put in place.

We help people in this type of situation all the time, quite often the first serious research they do on bankruptcy is when the ATO or another creditor write threatening bankruptcy proceedings.

Regarding the question of the practical implications of bringing many years of outstanding business and personal tax returns up to date people often say ‘I don’t have an Accountant at the moment.’

Or sometimes people say ‘I’ve made some enquiries locally and the Accountant I spoke to said it would cost at least $10,000 to bring my outstanding business and personal returns up to date and they wanted all those funds paid up front.’

Occasionally people say “Once the Accountant I was speaking to realized I would need to go into bankruptcy they told me they preferred not to have bankrupt clients.”

As I mentioned before Steve and I speak to people in these sorts of situations every week, in fact almost every day. For the past couple of years we have suggested that anyone with a need to have multiple years of outstanding tax returns bought up to date make contact a firm of Tax Accountants in Coffs Harbour, NSW to start a conversation.

The firm is McGrath Quality Accountants and their office is at 246a Harbour Drive, Coffs Harbour NSW 2450.

Telephone number is 02 66 52 7003.

The website link for McGrath Quality Accountants is

If you are calling McGrath direct then please mention to reception that you have had good read of Fred Appleton’s website and you would like to have a discussion with Leanne Wellington (or Kylie McGrath if Leanne is not available) about bringing your outstanding business and personal tax returns up to date.

Quite often people have spoken to Steve or myself before they make contact with McGrath and if that is the case then one of us typically flick Leanne and Kylie a short ‘heads up’ email so they can listen out for your call.

Either way please tell Leanne or Kylie that you may have to apply for bankruptcy shortly (or you have just had a bankruptcy application accepted in the past few weeks).

Be assured that both Leanne and Kylie are up to speed on how bankruptcy works and take a positive view. Typically Leanne or Kylie will chat to you over the phone for five or ten minutes and then they will send you their questionnaire asking you for some basic information on your business structure, income and expenses and when your business and personal tax returns were last lodged.

They will quote you a fee for their work and I expect they will want some funds paid up front before they begin.

You can be anywhere in Australia and they will be able to assist you.

The feedback we have had about McGath’s service and attitude is consistently positive, people are normally immensely relieved that their tax returns are being bought up to date at long last and at the same time they have the opportunity to go into bankruptcy as a means to deal with the financial fallout if they need to.

And very importantly once the outstanding returns are lodged then the fear of prosecution by the ATO is behind you.

That should put an end to waking up at 3am most nights worrying about being prosecuted by the ATO, you will probably start to get 8 hours of peaceful sleep!

You can’t put a price on that.

By the way, you can engage McGrath Accountants to bring your outstanding business, BAS and personal returns up to date as a one-off project and then get a local Accountant to look your tax affairs going forward.

Or you can remain a client of McGrath’s going forward even though you are unlikely to live in Coffs Harbour or on the North Coast of NSW. They have clients in all Sydney, Brisbane, Perth that they have retained even though the individual or business is no longer resident in Coffs Harbour.

Quite a few people we speak to once they have claimed bankruptcy start working on wages for a boss, they have had enough of being self-employed.

They usually say it is less stressful being an employee.

If during the bankruptcy you are due for a tax refund then you can expect the tax office will keep your refund to offset what you owed them.

You can expect to get tax refunds as normal after the bankruptcy is complete.

Company Directors

Whilst you are bankrupt you can’t hold the position of company director or company secretary for the period that you are bankrupt.

If you are a director or secretary when you go into bankruptcy then your bankruptcy trustee will likely tell you to send a form to ASIC letting them know you have become bankrupt, and your name will be cancelled from being a holder of these roles.

It doesn’t personally cost you anything to lodge the ASIC form.

On your bankruptcy is in place then any personal guarantees that you gave for company business will be cancelled by you being bankrupt. These personal guarantees become creditors of your bankruptcy and usually they are listed as such in the bankruptcy forms.

If the company becomes directorless then the company is left hanging with no officers and the company share, as an asset is by then under the control of the bankruptcy trustee.

Company creditors can still take steps to wind the company up, but you’re already bankrupt and would not have any personal liability. So unless the company has an asset that can be sold or money is coming in from debtors or perhaps there is an unclaimed insurance policy then the company itself may be a lost cause from the company creditors perspective.

From feedback that I get it seems that after a while a directorless company is usually struck off by ASIC, never to see the light of day again.

One thing seems to stick out in practice though is that unless ASIC is properly informed of your resignation as a company director or your disqualification then they will continue to send you the bills for company filing fees, so it is in your interest to notify ASIC promptly that you have become bankrupt.

The second scenario is if you are a company director and the company has assets, significant goodwill, a valuable license, money in the bank or money owed to it from sales or work already completed (or in progress) and if you are looking at bankruptcy for yourself as an individual then you may be best to deal with the company first.

That might mean that the company needs to be placed into voluntary administration or liquidation prior to you claiming bankruptcy.

If that is the case then most likely we will suggest you make contact with a company liquidator before we spend a lot of time talking about the ins and outs of bankruptcy for you. Nic Crouch and Shabnam Amirbeaggi are the two partners at Crouch Amirbeaggi.

Their firm offers a Business Advisory as well as an Insolvency Service.

Nic is a Chartered Accountant, Official Liquidator and Registered Trustee in Bankruptcy.

Shabnam is a CPA, Official Liquidator and Registered Trustee in Bankruptcy. They are based in Sydney and their firm and can take on work from anywhere in Australia.

The Crouch Amirbeaggi office address is :

Suite 403, 55 Lime Street, King Street Wharf,
Sydney NSW 2000
Telephone: 02 8262 9333
Email :

For years I’ve suggested to people who have companies that need dealing with that they give Nic or Shabnam a call and I’ve had so many good reports back.

Typically you would have a conversation with Steve or myself and once we have heard a bit about the company we would suggest you start a conversation with Nic or Shabnam.

Most times we would flick a quick ‘heads up’ email through to them letting them know to listen out for a call from you.

Or you can call Nic or Shabnam direct and start a conversation that way.

Most times Nic or Shabnam should be able to take your call or return it promptly.

Please mention to the front desk at Crouch Amirbeaggi that you have read Fred Appleton’s website and would like to speak with one of the partners or that you have spoken to Steve or myself direct and we have suggested you make contact. Nic or Shabnam would typically spend five or ten minutes with you on the phone without any obligation or cost.

If a company administration or liquidation is an option worth considering then I’d expect they will be able to outline to you the process, timeline, costs and they might be able to offer a view on the likely outcome for you as the director.

I am certain you will find both Nic and Shabnam professional, approachable, knowledgeable and empathetic.

I know they won’t place you under pressure to proceed with one of their services, instead they will seek to give you the facts and let you make the decisions, all in your own time.

I don’t get a commission for any business that Nic or Shabanm get from people who read my website, instead I charge Nic and Shabnam a fixed amount each year for advertising on this website.

Your Super

For those worried about bankruptcy and how it might affect your super fund assets then the good news is your superannuation assets are safe, regardless of how much money is in your super fund.

Your super assets are protected by bankruptcy law unless you’ve done something wrong like selling a major asset just prior to claiming bankruptcy, putting the proceeds into your super fund so that the money wasn’t available to pay your creditors.

If you are under a lot of pressure and stress at the moment then I’d suggest you think twice about trying to obtain early release of super to pay your creditors, especially if the released funds would only part settle your problem debts.

You are very likely to need the money in your super fund in the years to come, during your retirement. This is really what the government expects you to do. So going into bankruptcy now and settling your unmanageable debt via bankruptcy might well be the most sensible and practical decision.

If you have a Self Managed Super Fund then I’d suggest you talk to your Accountant or Financial Planner (i.e. the party that set the fund up for you in the first place and looks after compliance matters) about your possible plans for bankruptcy.


Bankruptcy for pensioners or retirees with unmanageable debts and who have minimal assets is generally a straightforward and sensible option.

Most weeks we are contacted by someone in their sixties, seventies and occasionally even their eighties needing to look at how the bankruptcy system works for the first time.

Usually they tell me they have struggled with the idea of bankruptcy for a long time ….. ‘it didn’t happen in our day’ is the phrase I hear time and again.

I agree, it didn’t happen in our day.

Though it might have happened a bit more than we knew about.

Perhaps we were just being naïve ? I don’t know.

Whatever the truth is about ‘back in our day‘ what is certain is that the world is a different place today compared to twenty, thirty or forty years ago.

Unsecured loans like credit cards and personal loans are easier to get into and is easier to roll over than ever before. Problem levels of debt can easily build up, especially if you have had a period of ill health or if your income has been up and down.

Once you retire then I can tell you that any pensioner or retiree on a low or modest  income and who has money owing on credit cards or personal loans will almost certainly struggle and have to look at whether bankruptcy makes sense at some point during retirement.

Getting into bankruptcy and dealing with the problem debt sooner rather than later is the usually the best approach I think, you don’t get any of these precious later years a second time over.

Occasionally I am contacted by people coming up to retirement, perhaps a year or so before their planned retirement start date seeking guidance on whether bankruptcy is an option worth thinking about.

As I mentioned before once your income drops in retirement and at the same time you are carrying $20k, $30k, $40k (or more) in credit card or a personal loan then something will need to happen as you and your debt will not be able to go on together forever.

Fortunately if a bankruptcy application is necessary then this allows your problem debt to be dealt with and cancelled in a very orderly, civilized and dignified manner.

How could it be any other way?

Here is a final thought and importantly it is not from me but from a recent client.

Earlier on this year we helped Gary (who is 69 at the moment) and I thought I would share with you what seemed to me to be the most important observation in his ‘thank you‘ email.

‘Everyone must make their own decision on bankruptcy but thanks to Fred, Steve and Helen I discovered that going down this road is just a consequence of life not a reflection on a person’s character’.

So, if you are retired (or even coming up to retirement) at the moment and you want to have a chat then please give us a call on 1300 794 492 or send us an email to

Your house

Did you know that in bankruptcy it is sometimes possible to save your house?

In fact, if you have large amounts of unsecured debt then going bankrupt might be the only way to save your house, and your sanity.

It some cases as part of your bankruptcy it is possible for your partner, family member or even a friend to reach a settlement with your bankruptcy trustee which results in your house being saved.

This is a topic in it’s own right and there is a separate tab on this website where Steve sets out a case study featuring Pete and Jill.

Further, for many years I’ve operated a dedicated website that discusses the ins and outs of how bankruptcy works with houses in quite a bit of detail.

Debt Agreements

I have mentioned Debt Agreements once or twice already.

The obvious questions are how do Debt Agreements work and importantly how do Debt Agreements compare versus bankruptcy?

A Debt Agreement is considered to be an alternative to bankruptcy but in my view they may just keep you broke.

The way Debt Agreements are intended to work is that you offer to pay back what you can afford but over a number of years, sometimes five years but it could be longer.

Then and only then, once the final payment is made your debts are cancelled.

However if you find down the track that you can no longer afford the repayments then most likely the Debt Agreement will fail. That will just take you back to square one.

Steve and I speak to many people who have gone into a Debt Agreement with good intentions but a few months down the track they can’t afford to continue, so if you are looking into a Debt Agreement at the moment then be fair dinkum about what you say that you can afford to pay.

Remember that Debt Agreements are controlled by bankruptcy law too so they will affect your credit rating for five years the same as bankruptcy.

It might be that the better solution to your debt problems is bankruptcy.

With bankruptcy your problem debts are cancelled immediately from your perspective, not years later when the Debt Agreement has been completed.

You can be in and out of bankruptcy in three years (or maybe 1 year??).

With bankruptcy you can just get on with life.

If you are thinking about a Debt Agreement at the moment and you are not sure if it is the right way to go then please give us a call on 1300 794 492 or send us an email to

Personal Insolvency Agreements (PIA)

Personal Insolvency Agreements (which are sometimes known a PIA) have been around for a lot longer than Debt Agreements.

Conceptually they both operate in a very similar way.

There are asset and income restrictions in the Debt Agreement rules which make them appealing people with lower incomes and little or no assets and these restrictions are not applicable to PIA’s.

When you stand back a bit a take a look through AFSA’s personal insolvency statistics they tell you pretty much all you need to know about PIA’s.

Almost no one uses them!

The most likely reason is for the average person they tend to be frighteningly expensive and comparatively complicated as a registered trustee needs to be in charge.

Let’s look at the AFSA personal insolvency statistics and let them tell the story.

Over the last five years there have been, on average, around 19,000 new bankruptcies started each year compared to just over 10,000 new Debt Agreements a year over the same period.

Compare that with just 255 new PIA’s each year (over the past five years) and you can see what people in financial difficulty have actually end up doing.

More often than not they have gone into Bankruptcy to deal with their problem debt, sometimes they have proposed a Debt Agreement and very rarely has someone used a PIA.

From what I have seen over the years PIA’s are pretty much the preserve of the big end of town and that seems to be where they work best.

A pretty common scenario would be a professional company director might use a PIA if he or she is caught with a big dollar director guarantees from a liquidated company.

That company director would probably through personal choice and careful planning have no assets personally with the family assets either being in a trust, a super fund or being wholly owned by a spouse.

A deal might be brokered by a lawyer with the main company creditor where a small number of cents in the dollar is offered via a PIA to all creditors (with the money coming from the spouse) in the knowledge the main creditor had already agreed to vote in favor.

The Trustee then has to convene a creditor’s meeting and the company director may have to attend the meeting in person.

The purpose of this meeting is for creditors to have the opportunity to ask questions and then for a vote to be taken as to whether to accept of reject the proposal.

The trustee would usually require the funds being offered as well as fees and out of pocket expenses to be already in his or her trust account before calling the creditors meeting.

If the proposal is accepted then the insolvency is resolved quickly without the need for bankruptcy and everyone can move on.

The company director can return to his or her chair in the next company without restriction.

They will have picked up a bad credit rating and a notation would be made on the government’s Insolvency register.

As you can imagine all of this costs money, as lawyers, accountants and a registered trustee are all usually involved.

If you have high levels of credit card debt then I have my doubts that a PIA would be best way to resolve your problem.

It might be that going into bankruptcy dealing with the problem that way is cheaper more effective.

If you are thinking about a PIA at the moment and you are not sure if it is the right way to go then please give us a call on 1300 794 492 or send us an email to

Saving money

Someone we helped a while back called Steve recently and enquired about know how to go about saving some money for the essentials whilst he was bankrupt.

Steve answered ‘spend less than what you earn’.

Our client found it difficult to believe it was that simple.

Most people who are bankrupt, even those on modest incomes are usually able to put a few dollars away so they are able to meet normal living expenses that come along from time to time, like replacing a worn out fridge or TV, servicing and insuring the car and even making sure that they have some money to take a proper holiday once a year.

That’s completely normal.

Higher income earners may pay significant income contributions as they go and most folks pay their contributions happily to their Trustee as they go.

They meet their normal living costs, pay the Trustee the income contribution amount required and the remainder they can do with as they chose.

If you have received a ‘Garnishee Notice’

A couple of times a month we get a phone call from someone who has been told by their boss or pay office that they have received a ‘Garnishee Notice’.

Usually it is a bit of a shock.

Most likely what will have happened in the prior few months a creditor, and quite often it will be a Second Hand Debt agency that the bank or credit card company has sold the debt onto, will have obtained a legal ‘judgement’ for an unpaid debt.

Probably an unpaid debt from years and years ago.

With that ‘judgement‘ the creditor can require your boss to pay a portion of your wages each week until the debt is settled.

I’ve heard of situations where the person was left with no where near enough money to pay rent and buy food after the ‘Garnishee’ was paid.

If you go ahead and go into bankruptcy then the ‘Garnishee Notice’ is finished.

You get your wages back.

If you’ve had court papers served on you, don’t throw them to one side and hope the problem will go away. In the end it won’t, I’d suggest you contact us now on 1300 794 492 or email us at

If your boss receives a ‘Garnishee Notice‘ he or she may get annoyed with you as this might mean extra administration work.

And people in your pay office at work might start talking about you behind your back.

It might be better to stay in front of events and deal with your problem debt today.

If you have received a ‘Bankruptcy Notice’

Every week we are called by people who have just been served with a ‘Bankruptcy Notice’.

Usually your creditor will have already had to prove the debt existed and obtained a judgment before they would be in a position to issue the ‘Bankruptcy Notice’.

In essence the ‘Bankruptcy Notice’ turning up in your hand is them letting you know that they (i.e. the person, business or entity that who you owe money to) intend to enforce their claim against you via bankruptcy proceedings.

By the way, serving you with a ‘Bankruptcy Notice‘ does not commit them to bankrupt you but it is designed to let you know that that is what they may have in mind.

They would not be able to proceed further until the 21 days noted on the ‘Bankruptcy Notice’ has passed.

During this 21 days you would normally be expected to pay the debt in full or try to reach a negotiated settlement.

Once the 21 days has passed and if the debt has not been paid in full or a settlement negotiated then they would have the option to take the next step and issue you with a ‘Creditor’s Petition’.

Quite a few people we speak to decide at this point that they have been putting off the inevitable for too long, meaning that decide to go into bankruptcy now via the self-declared process.

This is called presenting a ‘Debtor’s Petition’.

More often than not the people we help are relieved as they they now feel they are ready to take the necessary step to resolve their debt crisis.

Usually they ask us to take care of preparing the ‘Debtor Petition‘ and the other necessary paperwork most times this can be done within a week.

So, if you have received a ‘Bankruptcy Notice‘ in the past few days and you want to have a chat about it then please give us a call on 1300 794 492 or send us an email to

If you have received a ‘Creditor’s Petition’

In essence the ‘Creditor’s Petition’ is your creditor’s application to have you declared bankrupt in the Federal Court.

This would usually mean your creditor has the option to nominate the Trustee to administer your bankruptcy.

Only a minority of bankruptcies each year are via the ‘Creditor’s Petition’ route, the vast majority are done via the self declared route where a ‘Debtor’s Petition’ is used.

If you have been served with a ‘Creditor’s Petition’ then my suggestion is you call or email our office as soon as possible.

The telephone number for us is 1300 794 492 and the email is

It might be possible that you can still go into bankruptcy via the self declared process using a ‘Debtor’s Petition’ though this is not guaranteed.

If you have already been declared Bankrupt by a creditor

Occasionally we are contacted by someone who has been declared bankrupt by one of their creditors in the Federal Court, usually in the prior week or two.

Most times they will have received an official document in the post called a ‘Statement of Affairs’ complete with a letter from a Trustee instructing them to prepare the  ‘Statement of Affairs’, sign and lodge it by such and such a date.

Quite often they recognize that the ‘Statement of Affairs’ being twenty to thirty pages in length is too complicated for them to prepare themselves and they turn to us for assistance.

We can provide a service to you where we prepare the ‘Statement of Affairs’ on your behalf to a professional standard.

The document itself is the same ‘Statement of Affairs’ that we prepare everyday for clients who are preparing to declare themselves bankrupt via the self-declared route.

It is in your interest to have your ‘Statement of Affairs’ prepared properly as you need to be confident that it is free of any errors, omissions or mis-statements before you sign and lodge it.

If you have had any business structures like a company, Sole Trader, Trust or personal ABN in the previous five years then it is likely that supporting schedules will need to be prepared to go with your ‘Statement of Affairs’.

These supporting schedules typically need to be prepared even if the business is liquidated, de-registered, no longer trading or no longer active.

One last thing, but very important point to note, your period of bankruptcy does not begin until you lodge your ‘Statement of Affairs’.

I come across a person every year or two who have been declared bankrupt by a creditor years before and they never got around to preparing and lodging their ‘Statement of Affairs’.

Too hard’ ……… or………‘I lost the papers in a house move’……or…… ‘ my dog ate my Statement of Affairs‘ ……..that seems to be what people say most times.

This is crazy. Get your ‘Statement of Affairs’ completed to a professional standard right away and move one.

That will probably work best for everyone.

So if you have recently been declared bankrupt by a creditor and if you have been sent  a blank ‘Statement of Affairs’ instructing you to complete and lodge then please give us a call on 1300 794 492 call or email our office at

If you are overseas at the moment

We assist people who are overseas to apply for bankruptcy a few times a month.

If you own property in Australia and you are overseas at the moment then you may be permitted to apply for bankruptcy whilst you are outside Australia.

I usually suggest people check themselves with AFSA prior to them proceeding.

For everyone else the government seem to require that you are present in Australia to apply for bankruptcy.

That often means you have to return to Australia from your home overseas to lodge your bankruptcy application.

We normally assist with the preparation of the necessary paperwork before you return to Australia, that way you can sign and lodge your bankruptcy application on the same day you arrive back in Australia.

That tends to speed up the procedure so you are promptly in a position to make your application to your Trustee to return to the country you live in.

If you are overseas and would like a chat then please send an email us at or call the office.

Most people we help are in New Zealand or the United Kingdom.

Occasionally we are contacted by people in the USA, Ireland and ex-pats working in the Middle East.

In the past few weeks we have prepared bankruptcy paperwork for a guy teaching English in Japan and another set of bankruptcy paperwork for someone in the Phillipines.

The office number direct is 02 66 52 4799 and please keep in mind that Steve and I work normal office hours, Monday to Friday and we are in NSW.

Buying your way out of Bankruptcy early

Officially this is called Annulment.

You’ve got to do it through your bankruptcy trustee.

In most cases, once you’ve gone bankrupt, unless you own major assets or are a high income earner the creditors are likely to get next to nothing.

So, if your spouse, or parents or somebody else, not you, is able to come up with an offer to an amount in return for a full and final settlement of your bankruptcy debt, and enough of the creditors say yes, then your bankruptcy will be annulled which means cancelled.

This is known as a Section 73 Composition.

However, details of the bankrupt and the proposal and the meeting must be first be published.

If you’re now bankrupt and are interested in a Composition, contact your bankruptcy trustee.

Deceased Estates and Lottery prizes

People regularly ask us if they get an inheritance or win the Lottery whilst they are bankrupt then would they lose their inheritance or Lottery prize.

The short answer is ‘Yes’ and I think you could probably say the long answer is also ‘Yes’.

Usually the Trustee would write to you in the first few weeks and set out some of the things that you need to keep in mind over the following three years because you are bankrupt.

And they usually say that you would be legally required to inform them if you became attached to a deceased estate or won a prize in the Lottery.

Of course no one forces you to play the Lottery whilst you are bankrupt, maybe you stop for a while, that’s up to you.

And what is in Grandma’s Will is always up to Grandma.

If Grandma wants to change her Will she should always seek independent legal advice prior to making any changes.

However, some people prefer not to tell Grandma that they are bankrupt in the first place.

Quite often people ask what should they do in this situation, my answer is ‘I don’t know’.

The so called ‘stigma’ of Bankruptcy

In my view the stigma of bankruptcy is very much an imaginary thing these days.

If it existed at all, today it is an outdated notion from the past.

I’d suggest that you mostly forget about it, it tends to be played up a lot by those trying to make you feel uncomfortable for one reason or another, whether it be a family member, a debt collector or perhaps even someone trying to talk you into signing up to a formal Debt Agreement or some kind of consolidation plan.

Sometimes these people have an agenda to stop you from going into bankruptcy and resolving your situation that way.

You might want to keep in mind that their agenda may not be in line with your needs.

Besides, the most likely outcome is nobody around you like family, friends or work colleagues would ever know about you being bankrupt unless you told them yourself.

You would have to owe your employer, family members and friends money before they would be contacted by your trustee.

The likelihood that a friend or relative would pay to conduct a search on the National Personal Insolvency Index looking for your name is practically zero.

From my own experience and from the feedback that I receive on a regular basis from people I have assisted over the years, the most common experience is that bankruptcy is a huge relief, so rather than being stigmatized, you can expect that bankruptcy will provide you with an opportunity to move on and restore your quality of life.

Which is of course the most important thing.

If you are an Accountant or Solicitor

If you’re an Accountant or a Solicitor and you think that my website could be a useful source of bankruptcy information and you would like to add it as a link shown on your own website, then please flick through an email or give us a call before you establish the link so I can take a look at your site and we can have a chat.

Most times I am fine to agree.

Please don’t use any of my words directly on your own website without attribution as they are protected by copyright.

I often hear that a caller’s Accountant or Solicitor has asked their client to read the Fred Appleton website, and then they call our office for a chat.

Or sometimes the Accountant or Solicitor calls us first and then relays the information we provide to the client.

Either way seems to work fine.

It’s always refreshing to hear that we have been recommended.

Is it time to act now?

If you have read this far then it might be the time to act now.

As I have mentioned already bankruptcy will free you from your problem debts immediately as far as you are concerned.

It will put an end to all of the debt worry that has been keeping you awake at night.

Perhaps, most importantly, it will enable you to prioritise your own and your family’s wellbeing, above your debt.

We are often told that after speaking to us people feel much calmer and more in control.

The main thing is to get back on your feet and on with your life.

Read the success stories and testimonials. You will see that we help people with bankruptcy questions from all over Australia including Sydney, Melbourne, Brisbane, the Gold Coast, the Sunshine Coast and more recently a lot of people from Perth as well as the north west and south west corners of Western Australia.

Most likely they have been written by people in a similar situation to you.

So when you are ready, please give us a call on 1300 794 492 (or you can use 02 66 52 4799 if you prefer to make a direct call) or send us an email to If I’m not around then somebody from the office of Nicholls & Co will take the call for you and should be able to help you.

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