Should I Declare Bankruptcy?

Declaring bankruptcy will provide relief from the mountain of debt. However, there are long-lasting consequences that should be considered before deciding if bankruptcy is the right option for you or your business. Declaring bankruptcy should be the last resort.

What are the Implications of Declaring Bankruptcy?

Being bankrupt has consequences on many aspects of your life, not just financial.

Travel

Restrictions are placed on people who have declared bankruptcy. You are not permitted to travel overseas without the written permission of your trustee. To gain approval, your trustee will want to know the purpose and other details of your trip before making a decision.

Owning a Business

You may be banned from owning a business or being a director if you are a declared bankrupt.

Public Register

Your name, address, occupation and current status of your bankruptcy will be included on the National Personal Insolvency Index (NPII). Anyone can search the register for details of all insolvency proceedings in Australia.

Credit File

It is difficult to obtain finance in the years following a bankruptcy because credit agencies will keep a record for:

• Five years from the date you became bankrupt; or
• Two years from when your bankruptcy ends, whichever is later

Not Everything is Covered

Unsecured debt such as credit card and personal loans is covered by bankruptcy and doesn't need to be repaid however some debts still stand. If you have a government student loan, child support and maintenance costs, a court-imposed fine and unliquidated debts, these will remain after bankruptcy.

Income

If you earn any income that isn’t ordinary income during bankruptcy such as superannuation, inheritance or a compensation payout, your trustee can claim it.

If you are a high-income earner, your trustee may order you to make payments during the three years of bankruptcy for distribution to creditors. The income threshold limit is set based on the number of dependents. A bankrupt will be required to hand over 50% of income earned over that limit.

Professional

Your income earning capacity could disappear if you declare bankruptcy. Some workers will have their licence for building, property management, liquor and financial brokerage cancelled immediately after declaring bankruptcy.

Your Assets

Your trustee can seize some of your assets and sell them to repay part of the debt you owe creditors. You can keep a vehicle up to a certain value but a more expensive vehicle can be claimed. Tools of the trade to a limit can be retained.


If you have a house, the trustee can claim it. Basic household items such as furniture and personal effects are not usually seized.

Are there any Positives in Declaring Bankrupt?

Yes, some people declare bankruptcy and feel the positive aspects outweigh the negative.

Debt Removed

Bankruptcy may wipe out most or all of your debts and doesn't need to be repaid in the future.

Reduced Stress

Being under constant financial stress can have an impact on a person’s physical and mental health. After declaring bankrupt, some of the stress can be lifted. Some people see bankruptcy as a clean slate. They are starting over their financial lives from nothing but are determined to improve their financial health.

Look at the Whole Picture

Often people will think their financial situation is so grim that bankruptcy is the only answer and aren’t aware of other options available to them. Before proceeding with bankruptcy (personal, company or business), seek expert advice. WA Insolvency Solutions has been able to assist individuals and businesses avoid bankruptcy and had a positive long-term outcome.

It's advisable to talk to experts and agencies in Perth about your bankruptcy and financial situations to get details on options at your disposal and to make sound financial decisions.