Bankruptcy Information Note 1 - Your Income
Your income during bankruptcy: what you can earn and keep
Contrary to what a lot of people think, and what some websites try to say, during the 3 years of your bankruptcy you can continue to earn as much as you like, there is nothing stopping you. There is no limit on how much a bankrupt can earn so don't let bankruptcy stop you. Get on with your life, go for it.
Below is set out for you the base amounts that you keep out of your earnings during the period of your bankruptcy. The Threshold Amount that you can keep is basically your net income after tax and child support (if applicable) is deducted. If you're in business whilst bankrupt, then of course it's also after net (after tax) business expenses.
Your net income could be adjusted to take into account things like salary sacrifice and excessive superannuation payments etc. Your bankruptcy trustee has to determine your real net income according to the bankruptcy rules.
The income threshold figures are also per person, and they are adjusted by the government every March and September to allow for the movements in the cost of living.
With no dependants your net income can be $53,653.60 net per annum, i.e. that's an average of $1,040.03 net per week take home pay. This is your spending money. It's all yours, it's what you can keep, and so anything over that is split 50/50 with your bankruptcy trustee.
Go out and earn as much as you can over that, make your $$$$$$million dollars, be glad that you're going to have to pay something to your bankruptcy over the 3 years of your bankruptcy. It means that you're recovering at a faster rate.
With 1 dependant your net income can be $63,311.25 net per annum, i.e. an average of $1,227.23 net per week take home pay. This is your spending money. It's all yours, it's what you can keep, and so anything over that is split 50/50 with your bankruptcy trustee.
With 2 dependants your net income can be $68,140.07 net per annum, i.e. an average of $1,320.83 net per week take home pay. This is your spending money. It's all yours, it's what you can keep, and so anything over that is split 50/50 with your bankruptcy trustee.
With 3 dependants your net income can be $70,822.75 net per annum, i.e. an average of $1,372.83 net per week take home pay. This is your spending money. It's all yours, it's what you can keep, and so anything over that is split 50/50 with your bankruptcy trustee.
With 4 dependants your net income can be $71,895.82 net per annum, i.e. an average of $1,393.63 net per week take home pay. This is your spending money. It's all yours, it's what you can keep, and so anything over that is split 50/50 with your bankruptcy trustee.
With 4 + dependants your net income can be $72,968.90 net per annum, i.e. an average of $1,414.93 net per week take home pay. This is your spending money. It's all yours, it's what you can keep, and so anything over that is split 50/50 with your trustee.
Many people tell me that they don't earn that anyway so going over the limit is quite often not a real consideration.
Don't forget that those amounts are each too. If a husband and wife each go bankrupt, and say that they've got no dependants, then they can each earn the net threshold amount per week before their bankruptcy trustee can put his or her hand out for a cut.
For bankruptcy purposes a dependant is a person who lives with the bankrupt and who is wholly or partly dependent upon the bankrupt for economic support. The dependant can earn $3,435 per year before they cease to be eligible as a dependant.
Don't overlook the fact that a husband or wife or partner who is wholly or partly dependant on you, the bankrupt, for economic support can be a dependant.
If you want to be in business for yourself whilst bankrupt, you must trade in your own name, Joe Bloggs, or Joe Bloggs Painting. I cover this in Bankruptcy Information Note 4 - General Bankruptcy Information. I also cover your involvement with a Pty Limited company in that Information Note too.
Bankruptcy cuts off the current overwhelming debt that you've got right now, and whilst it places some restrictions on you (which I'll cover as you read this website) it does allow you to get back on your feet and on with your life again. You saw that in Craig's testimonial on the home page.
Craig has since introduced my bankruptcy website www.fredappleton.com.au to others who he has come across who were in the same position that he was in.
I myself would be the best example of a bankrupt getting back on his feet and becoming successful again. And I was 57 when I went bankrupt.
If during the period of your bankruptcy (normally 3 years) you "come good" (my term) and so earn ABOVE these limits, called the Threshold Limits, then you simply share these "come good" amounts 50-50 with your bankruptcy trustee. However, you always keep the base amount, the Threshold amount, plus you keep your 50%.
If its applicable (and in many cases it's not, because you simply don't earn enough anyway) then from the 50% that you pay to your bankruptcy trustee, they pay about 6% to the government as a separate tax, they retain some as their fee, and then from what is left over, they pay your unsecured creditors pro rata to their debt.
If you have to pay any of your bankruptcy income to your trustee (and shake yourself by the hand if you do, because that means that you're really getting on with your life again, congratulations) because you've "come good" and have earned over the Threshold Amount, then that's only during the (mostly 3 years) term of your bankruptcy. If you have some specific unusual circumstances and paying the 50% share to the trustee is too difficult, then you can apply to have the figure reviewed.
If it is reviewed, and decreased for a period, then you may have to continue to pay the bankrupt estate after your bankruptcy ends, until the real amount that you owed is finally paid.
I've had clients successfully apply to have it reduced or eliminated for a period in cases where the clients were incurring heavy medical and dental and other like expenses at the time for themselves or their dependants, or their rent was taking up a large portion of their net bankruptcy income.
If a circumstance like that applies to you, then you simply contact your bankruptcy trustee and have your case reviewed.
If you don't pay any of these 50% amounts when you should, then your bankruptcy trustee can take steps to legally order you to open a new bank account, known as a supervised account, for your income to go into, and there are then strict controls over this account.
We've come across cases where the trustee has asked to pay a higher contribution than what we thought was right, so keep your eye on this. Here's what the government's bankruptcy service, known as AFSA, said about this on their website www.afsa.gov.au in October 2013.....”Overpayments that result from a reassessment (that is, when your actual income at the end of the year is found to differ from your projected income that was used to calculate your liability at the start of the year) cannot be refunded. I think that that’s so unfair.
If you have further contributions liabilities, the overpayment will be credited to these. If though the overpayment arose in the final year of your bankruptcy, you will not have it refunded to you.
Now that you've seen how bankruptcy affects your income you may be able to start to see that the main thing about this is not to let bankruptcy slow you down or stop you. The great plus in all of this is that by getting the protection of "the umbrella of bankruptcy" the awful harassment and assaults and straight out lies from some of the debt collectors, and your resulting worry and stress and loss of sleep, will cease.
Quality of life will kick in again. I can vouch for that, it really does. People who have gone bankrupt tell me that all the time.
Just to follow up I applied for bankruptcy a month ago thanks to your website as I was just unable to get on top of my debt and must thank you so much for your fantastic website slogan "Bankruptcy Saves Lives" which caught my eye when I was all but thinking of ending my life.
Everything you said would happen, DID happen. It was quick, you and Helen gave me excellent advice. You called, as you said you would and I must say both yours' and Helen's professional, no nonsense information was entirely accurate.
You are right Bankruptcy DOES save lives. Although I am a professional person, and totally honest, I found myself in an untenable situation. Single again, no assets, made redundant and large credit card debt from living 10 years on my own, having a "go" and earning small $$$$$ with part time after part time jobs and trying to pay rent, phone & electricity bills and keep my 10 year old car registered and insured.
Yes I was terrified to collect my mail, the box was constantly filled with threatening letters from 4 banks, my phone rang every day until 8.30pm, caller "unknown" but when I answered it was always a bank "Yes I am sorry you were made redundant but you owe $$$$$ and will you be paying that amount today No, OK I will call you again tomorrow".
I was even too afraid to enter into any possible new relationship with a man because of these constant threatening phone calls, sometimes up to 8 per day, so kept to myself until I discovered the Fred Appleton website and decided to change my life.
I am now legally bankrupt, the phone stopped ringing immediately, the letters also stopped and a huge weight has lifted from my shoulders. I smile, sing, play music and have met a man who I really like. I have told him I am bankrupt and would not enter into a relationship with him, without him knowing this.
Yes, it is my private shame, especially for an ex- banker, however I am now able to get on with my life, know I gave the last 10 years my very best shot and do not have a dishonest bone in my body, it was all just bad luck and tough life's experiences.
Some of my favourite people were declared bankrupt on reflection/ RIP Billy Thorpe.
My advice to people in trouble like myself is trust this website, all information is accurate, Fred himself was declared bankrupt and knows what he is talking about.
Maintain your dignity and respect, people around you can be cruel so don't tell anyone other than your significant other if you declare. People won't find out anyway-as Fred says, all banks addresses are PO Boxes somewhere.
Your kids and relatives don't need to know either unless absolutely necessary. I haven't and won't be telling mine.
All power to you Fred and Helen, thanks so much for giving me the knowledge to get my life back on track.
All the best
(The Helen mentioned here is one of my colleagues).
Here's another one...
Hey Fred and Steve, things are going great for us. We have a new life in country Victoria, and one or two creditors tried every dirty tactic to get money off us, but thanks to my being well briefed by you and your site I was able to send them packing.
The most amazing thing is the lack of stigma: so many people offered to help us, and others came out of the woodwork stating how they had been there and done that.
I have a new career to boot and life is terrific, bankruptcy hasn't affected our life at all. We were able to rent a house, get utilities connected and new phone plans without a hitch.
John (dated 10th November 2011).
I expect that you can now begin to see that even after considering the fact that you'll be bankrupt for 3 years and so in that time can't own any major assets except a vehicle, some tools of trade and some ordinary household and private goods like that (this is covered in Bankruptcy Information Note 2 - Your Income and Assets) and that you'll have a bad credit rating for 5 years, even allowing for that, you may now be able to see that you can start again and get on with your life. From where you are right now, how can anybody honestly say that bankruptcy is the last resort. Clearly its not
Some people say that bankruptcy is too easy. Garbage, in reality the "umbrella of bankruptcy" is a humanitarian sort of thing, a circuit breaker, a lifeline. By the time that you read this you know that you've already paid a big price for what your circumstances over the last year or two, and resulting debt, has done and is doing to your life.
The price that you've paid is not understood by the do-gooders or those whose knowledge of bankruptcy is from text books or their hip pockets. Quite often some of your family and friends can't cope with it either, often they're no help. Print out this whole web site and give it to them to read, www.fredappleton.com.au. You'll be doing some of them a favour, no doubt.
To have a feel about bankruptcy, to know the chill of even considering it in the first place, is something that is very personal, it's a dark place. I think that it's something that we both have had to experience and appreciate to even start to understand what this is all about.
Once you go bankrupt your debt will be sorted out and basically it will be categorised into one of three boxes.
If you have debt that is child support, a HECS type debt, court imposed fines, a debt incurred by fraud, or a Centrelink debt, then this debt goes into the first box and, generally speaking it does not get cancelled by bankruptcy. You must pay it.
I've also handled a matter where a fellow owed money to the government on a Victims of Crime matter, something do with a traffic incident. Anyway, it turned out that his driver's licence had been cancelled and he couldn't get it back until the Victims of Crime compensation debt had been paid in full. That was an interesting new twist.
I also understand that in some states if you have unpaid parking fines and traffic fines then they may result in your driver's licence or your car registration being cancelled until the fines are paid. I suppose that if bankruptcy has freed you up from your other overwhelming debt, then you may have funds available to pay these types of fines.
Now the debt which most people have and what I call "tied up debt" goes into the second box. In this case an asset is tied up by the debt.
A house mortgage and some car loans would fall into the category of "tied up debt". If your house repayments get too far behind then the bank can take possession of the house and sell it because it is secured ("tied up") by the mortgage. Similarly, some car loans tie up the car by having a Bill of Sale over the car as security. If the loan falls too far behind, then the lender can take possession of the car and sell it to get their money back.
In these sorts of cases, if the bank or lender incurs a loss because the asset did not sell for enough to cover the debt, then you don't still owe the amount of the loss if you go bankrupt. You're free of that debt.
If you've got debt of this sort and want to know more then just contact me again and we'll go over this again with you, as it applies to you.
In the real world people rarely lose cars with bankruptcy because mostly the debt on the car is more than the car is worth. In this case I simply advise clients who want to keep their car to have the car loan up to date when they go bankrupt, and to then keep the repayments up to date. I discuss cars more in Bankruptcy Information Note 2 - Your Income and Assets.
With houses, the bankruptcy trustee can sell the house, but that need not necessarily happen.
Also on the homepage I refer to another website that I have written about bankruptcy and houses, so go and read it please at www.bankruptcyandhouses.com.au Also read Bankruptcy Information Note 3 - Debt Agreements here about Debt Agreement Proposals. Although they're oversold to death, entering into a Debt Agreement may be a way to save your house. Do the worksheets there, but be fair dinkum with yourself. Then if you want to, or are still in doubt, copy and paste them and flick them to me and we can have a chat.
In all cases of "tied up debt", if the asset is repossessed and sold at a loss and the loan is not paid out in full, then if you go bankrupt you do not have to pay back the shortfall. Any balance like this simply gets transferred to become a debt in the 3rd box which I discuss below. The shortfall becomes an unsecured debt.
By the way, I hear from time to time that some debt collectors chasing a car repayment debt say that even though a person goes bankrupt then you have to pay the loss if a car is repossessed and sold. That's simply not true. I've also heard that some also say that even if you go bankrupt then you have to pay the costs of the car being repossessed and sold. That's not true either.
The 3rd lot of debt that is left I simply call "the rest" and these are your unsecured debts. If you go bankrupt then you never personally have to pay this type of debt. Some debt collectors say you do. You don't.
If you "come good" by earning income above the earlier mentioned Threshold Amounts, or your bankruptcy trustee can get some funds by selling your assets, or you've received a windfall from grandma's will during your bankruptcy or despite the competition, your numbers have come up in Lotto, then he's entitled to take it to pay your full debt, plus interest to date, plus his or her trustee's fees, plus the government's tax on it all. You can have the rest.
The theory goes that from these funds that the bankruptcy trustee may be able to collect, after he takes his fee, the unsecured creditors who make up your 3rd box of debts, will be paid from the balance.
If you get the government as your bankruptcy trustee they won't ask you personally to pay them anything, however, I'm a bit confused about what to tell you if you find that your matter has been transferred to a private trustee. This is what it says on the AFSA website...Registered Trustee minimum fee entitlement.....$5,000. ........Trustees are paid to administer bankruptcies. From December 2010 they may recover this minimum fee (if not fixed by creditors) from any property and/or income realised in the estate. They may recover this minimum fee if they do not receive enough from the sale of bankrupt's assets or income contributions.
From enquiries that I've made it seems that the government (AFSA) expect a trustee to "just wear the cost themselves if your bankruptcy has no money in it. If you find that you are billed for your matter separately, then my suggestion is that you contact AFSA at email@example.com to see what is right at the time.
Examples of the sort of debt that is unsecured, and so cancelled as far as you are concerned if you go bankrupt, is credit card debt, unsecured personal loans, mobile phone debt, income tax (including GST) debt, store card debt. If you are in business in your own name it includes trade creditors and where you've given them, personal guarantees.
In some cases store card debt is not secured, and so in that case it's not usually "tied up debt", so it's then put in the 3rd box with all of your other unsecured debt and is cancelled on your bankruptcy. You lose the debt and get to keep the asset.
Don't rush out though and buy a fridge or something on your store card, and then go bankrupt tomorrow. Something blatant like that could be looked at as fraud. You're expected to be fair dinkum in all of this. If you're really seriously thinking about bankruptcy, try not to use your credit cards. In doing so, use your common sense.
If the store card debt is secured, or it's really a rental agreement, then of course you'll have to keep up your repayments if you want to keep the asset.
After you've read what I've written in this web site, and we've answered any queries and concerns that you may feel like taking up with us, I hope that you feel that you then know enough about your situation to see what can, and should be, done.
If you decide to declare yourself bankrupt and you'd like some assistance with the paperwork from this service, then no matter where you are in Australia (or overseas for that matter), we can do it for you very quickly, all over the internet or through the post.
Basically speaking, where I'm coming from in this is that if you've tried the best you can to pay your debts, but for whatever reason you've now had enough, then the relief that can be offered to you through what I call "the umbrella of bankruptcy" may be of some help.
It would be best if you would print out and then quietly read everything on this web site. I think that you'll identify with a lot of it, and you'll understand bankruptcy, from your point of view, a lot better.
(I didn't know for a while that the best way to print the site out was to go to the printer button at the top of this site and give it a click, then again click the printer sign that appears in the window box that comes up. If you do that you'll find that the information sheets and testimonials print in a font size that's easier to read).
You'll find that some of the things that you may have thought or imagined about bankruptcy, and some of the things that grandma and the debt collectors and others have been telling you about it, and about what they can do to you, and what may happen to you, just don't stack up.
The stigma of bankruptcy is very much an imaginary thing. You can mostly forget, it's played up a lot by those trying to make you feel uncomfortable, whether it be a family member or a debt collector. From where you're at right now, bankruptcy could have a lot of very real benefits.
From my own experience, and from the feedback that I receive on a regular basis from people who have used my service over the years, bankruptcy can be a huge relief, in fact in most cases bankruptcy can restore your quality of life, it gives you back your freedom. Here's an extract from what you'll read in Bankruptcy Information Note 6 - Bankruptcy Testimonials, the Testimonials Sheet, to see what I mean.
"First and foremost my thanks to you both for your understanding and help. This may seem a small thing but the following has had a huge effect on my life…..I no longer flinch when the phone rings or I get a knock on the door. Once again my sincere thanks for your help."
"Dear Fred, thank you for all your help in this. It is so nice not to dread answering the phone or going out to the letterbox. I was amazed to find that the "stigma of bankruptcy" was not as bad as I feared."
I think as you read these bankruptcy information notes you'll find you don't have to put up with the misery and worry and the verbal assaults and harassment and bullying from the debt collectors that you're going through now. Bankruptcy is about getting you back a quality of life.
You'll read that the government has provided you with a choice of practical solutions. Declaring bankruptcy enables you to start again, debt free.
Don't misunderstand me, the government wants you to try and pay your debt, but if you've reached the end of the road and you're on a treadmill just sinking into the quicksand of debt and despair, then they put bankruptcy there as a way to help you to start again, to get back on your feet, and on with your life.
I think that they may also be mindful that your debt worries will get to make your health suffer, so then the government will have to pick up a bigger tab paying for your recovery through the health system, and through Centrelink. From Australia's point of view it is probably cheaper to provide you with the option of going bankrupt. If you get back on your feet and on with your life you'll contribute more to society than you will by remaining downtrodden and in debt.
On the health point, after I went bankrupt I made a point of doing something about my health as at that time I felt that I was stressed out and overweight, a recipe for disaster.
What I did was I started walking, every day. Walking is free. Perhaps you will find it more enjoyable by listening to music as you go. The main thing is, get involved in something like walking, or gardening, or swimming, before your debt problems make matters even worse for you.
After I went bankrupt I think that walking had a lot to do with helping me to get back on my feet and so be able to get on with my life. I still walk, I love it, and it's still free.
So did singing, check out www.singaustralia.com.au at some stage, it could be for you, to help to relieve your stress.
You can very quickly become bankrupt and out of debt, don't let health issues caused by all this muck things up, when they needn't.
Bankruptcy has been put in place by the government to be a lifeline, a circuit breaker for people who find themselves with, what the then Attorney General in the Howard government in 2003 Darrel Williams called, "overwhelming debt".
There is no definition of what is overwhelming debt. You know if you've got it. Bankruptcy simply cancels most, if not all, of this overwhelming debt and gives you the chance to start again.
Don't feel ashamed, I send people from all walks of life and all age groups bankrupt, you'd be surprised. Nobody intends to go bankrupt but the wheels simply fall off, mostly through something like illness, relationship problems, unemployment, underemployment, broken dreams, the rashness of youth and the Global Financial Crisis, you name it, it happens. And now we're seeing whole countries not being able to pay their debts. But your debt problem can be fixed, probably by about the end of next week.
There are a few penalties for taking the bankruptcy option of course. For 3 years (in most cases) you can't own much, and your credit rating is badly damaged with the commercial credit rating agencies for 5 years, so you may find it hard to get credit again in that time. What you've got to do is make yourself worth lending to.
You may also lose some assets, although despite what other web sites that are just trying to scare you away from bankruptcy and into something that they're selling may say, in the overwhelming majority of cases this hardly happens.
Unless it might affect your personal safety, you're also put on a government data base for life, that's the National Personal Insolvency Index, the NPII. In reality, it seems that the National Personal Insolvency Index, unjust though it is, is hardly ever an issue. You'll read later what overkill this is.
Debt incurred as a result of a motor vehicle accident, where the other party's insurance company is claiming that you now owe for the damage to their insured's car is also cancelled. If you're not covered by insurance, to get the debt included in your bankruptcy, a few things have to happen first. It has to be established that you owe the debt. A letter from an insurance company saying that you do does not establish your liability for the debt. If this is your problem then I suggest that after you've read the rest of this website, you send us an email to firstname.lastname@example.org about this.
Over the years I've helped with the paperwork for retirees and pensioners go bankrupt with only a few thousand dollars of debt. After a few years the sleepless nights and worry and the pressure of a few thousand dollars of debt, debt that they can't pay, becomes simply overwhelming.
Pensioner debt is mostly credit card debt carried over from when they were last employed and had a bigger income with which they were able to cope with the debt. Now, on a pension, and although it goes against their grain and try as they might, they just find it so hard, bankruptcy cancels their debt and so they can get on with their lives and live on their pension.
At the other end of the scale I've known people on good incomes choose to go bankrupt because they've realised that the larger level of their debt (all of what could be described as dead end debt was going nowhere even though they were making their payments on time, all the time.
Bankruptcy is there to enable ordinary people to get out of debt, to get back on their feet and so get on with their lives. The decision that your debt is overwhelming is simply relative; it's a very personal decision.
The decision that you've really got to do something about your overwhelming debt, and that declaring yourself bankrupt could be what you have to do, will probably be one of the biggest and hardest decisions that you'll ever have to make. It was for me.
In the Testimonials in Bankruptcy Information Note 6 - Bankruptcy Testimonials you will read
"Again THANK YOU is not a big enough phrase for how I feel you have helped me, in some ways you saved my life".
From years of experience with people who have contacted me through this website it seems to me that most debt is caused by unavoidable circumstances, for some reason the wheels simply fall off.
Most of the debt that I see is the result of a period of unemployment or underemployment, or you've been through a period of ill health, or you've been through a relationship breakdown. Using credit as a stopgap measure often leads to what later becomes your overwhelming debt when the payback time arrives before the problem has been solved.
As a general rule you will remain bankrupt for 3 years, although you can make a lesser offer to your creditors after you've gone bankrupt, through your bankruptcy trustee.
Sometimes your reduced offer is accepted, and so you are discharged from bankruptcy in less than three years.
There are occasionally reasons which could cause your bankruptcy to be extended to 5 or 8 years, but they are really an exception, they are not the general rule (see Bankruptcy Information Note 2 - Your Income and Assets ). Thanks for reading this far, I hope that all of this has been of some help. If you're ready to proceed, now read Bankruptcy Information Note 2 - Your Income and Assets If you haven't already done so, Bookmark or save the site in your Favorites, and then hit Refresh when you come back to read more. I hope that by now you're starting to feel a lot, lot better.
Save this page, and Refresh whenever you come back to it, but right now