|
DEBTS
DEBTS & CREDITORS: WHAT HAPPENS TO THEM IF I GO BANKRUPT?
Reproduced by express permission form the Commonwealth Government, Insolvency
and Trustee Services Australia.
June 2004 Edition
How will bankruptcy affect my debts?
A debt is money that you owe to a creditor. Once you are bankrupt, creditors
with debts included in bankruptcy should stop contacting you.
You must include all your debts in your Statement of Affairs, including:
- debts you owe jointly with someone else
- any loans to you from friends and relatives.
Your bankruptcy will not affect a creditor's right to pursue another person,
such as:
- a person who is a guarantor for your debts
- debts in joint names with another person (eg your wife or
husband).
You are released from certain debts at the end of your bankruptcy (after
discharge from bankruptcy). However. there may be some debts that you will still
have to pay.
Debts you still have to pay during bankruptcy
1. Debts which are not provable in bankruptcy. Creditors of this type of debt
cannot receive any money from your bankrupt estate but they can continue debt
recovery action against you even during bankruptcy eg:
- penalties and fines imposed by a court
- damages from accidents (eg car accidents) unless, before
bankruptcy, the sum of damages has been fixed by a court judgment or you have
a written agreement with the other party
- student assistance/supplement loans
2. Any new debts you run up on or after your date of bankruptcy.
Debts you still have to pay after your bankruptcy ends
Creditors of certain types of provable debt can both receive money from your
bankrupt estate and continue debt recovery action against you after your
bankruptcy ends eg:
- child support debts
- maintenance
- accumulated HECS (Higher Education Contribution Scheme) debts owing when
you became bankrupt, excluding any amount shown on a notice of
assessment issued by the Australian Tax Office (ATO) before your bankruptcy -
ask the ATO if you need more information
- debts incurred by fraud.
Note: non-payment of essential services (electricity, water, telephone
etc) and parking/traffic fines can cause difficulties. See Unsecured
Creditors for further details.
Exempt assets are assets or property which cannot be sold in bankruptcy by
the trustee
More information on assets is available in the pamphlet: Assets:
What happens to my assets if I go bankrupt?
How will my creditors be affected?
Secured creditors
A secured creditor is a creditor who holds a security over your asset which
entitles them to take and sell the asset if you fall behind in payments.
Examples of secured creditors include:
- Banks with a mortgage over a house
- Finance companies with a chattel mortgage, hire purchase,
lease or bill of sale over a car, furniture or electrical goods
- Creditors secured by government legislation over houses and
land, such as council/shire rates and water rates.
If you become bankrupt, secured creditors will probably contact you to find
out what you plan to do.
If you are in doubt about whether one of your creditors is secured, you
should first ask the creditor. If you are still doubtful, ask a financial
counsellor or your trustee.
- If you wish to keep an exempt asset which is
secured, you will need to keep paying for it or the creditor will take it
back.
- A secured creditor cannot take an asset back just because
you are bankrupt.
- Your trustee can sell a non –exempt asset if it is
of value, even if you are paying it off (eg a house).
- In some cases creditors retain ownership of items you have
bought until their debt has been paid in full (eg retention of title,
consignment, commission).
- Creditors who hold a security deposit or bond (eg a
landlord) are entitled to keep it to reduce your debt.
- The ATO can keep your tax refund and offset it
against any debt you owe to the ATO and/or other Commonwealth office (eg Child
Support Agency, Centrelink).
- If a secured creditor incurs a loss from the sale of the
secured asset, they may claim the loss in your bankruptcy as an unsecured
creditor.
Unsecured creditors
An unsecured creditor is a creditor who generally does not have the right to
take back an item you bought but have not paid for.
Examples may include:
- banks, finance companies and credit unions for person
loans, credit cards and store cards
- telephone and internet providers
- tradespeople such as builders and electricians
- professionals such as doctors and lawyers.
If you become bankrupt, any legal action by unsecured creditors against you,
such as a summons, garnishee (a compulsory deduction from your income or bank
account) or recovery action by a sheriff or bailiff, must stop.
If any unsecured creditors demand that you pay their debt, you should
immediately tell your trustee who should inform the creditor of the terms of
your bankruptcy. If you are being harassed or coerced about debts you may have
rights under the Trade Practices Act. For further information visit the
Australian Competition and Consumer Commission website www.accc.gov.au or call
the Infocentre 1300 302 502.
Providers of essential services (eg electricity, gas, telephone,
water) to your home may disconnect the service if you do not pay your current
account or pay a security deposit/bond. If you later move to another home and
still owe them money, you may be required to pay an increased deposit/bond to
obtain the service.
In most States, if you do not pay debts for parking, traffic and other
infringements of State laws, your driver’s licence and/or your motor vehicle
registration may be suspended until payment is made. Bankruptcy does not stop
such suspensions.
Debts and creditors can be difficult to sort out. Talk to a financial
counsellor or ITSA if you are unsure about what type of debts or creditors you
have. ITSA offices can provide you with a list of advisers (see rear cover or
www.itsa,gov.au)
Where to contact us
Telephone 1300 364 785
ITSA website wwwitsa.gov.au
ITSA Offices
ACT
Level 2, NFF House, 14-16 Brisbane Avenue BARTON ACT 2600
Tel: 1300 364 785
Fax: (02) 6270 3608
email: itsa.canberra@itsa.gov.au
New South Wales
GPO Box 548 SYDNEY NSW 2001 Level 8, 135 King Street SYDNEY NSW 2000
Tel: 1300 364 785
Fax: (02) 8233 7891
email: itsa.sydney@itsa.gov.au
Queensland
Brisbane
PO Box 10443 Adelaide Street BRISBANE QLD 4001
Level 16, 340 Adelaide Street BRISBANE OLD 4000
Tel: 1300 364 785
Fax: (07) 3360 5466
email: itsa.brisbane@itsa.gov.au
Townsville
PO Box 1527 TOWNSVILLE QLD 4810 Level 1,
National Australia Bank Building 315 Ross River Road AITKENVALE OLD 4814
Tel: 1300 364 785
Fax: (07) 4727 0500
email: itsa.townsviIIe-0itsa.gov.au
South Australia/Northern Territory
GPO Box 2604 ADELAIDE SA 5001
Level 18, Grenfell Centre 25 Grenfell Street ADELAIDE SA 5000
Tel: 1300 364 785
Fax: (08) 8112 4305
email: itsa.adelaide@itsa.gov.au
Tasmania
GPO Box 850 HOBART TAS 7001
Level 4, ANZ Centre 22-26 Elizabeth Street HOBART TAS 7000
Tel: 1300 364 785
Fax: (03) 6221 7700
email: itsa.hobart@itsa.gov.au
Victoria
Level 10, Melbourne Central 360 Elizabeth Street MELBOURNE VIC 3000
Tel: 1300 364 785
Fax: (03) 9272 4900
email: itsa.melbourne@itsa.gov.au
Western Australia
GPO Box H536 PERTH WA 6841
Level 12, Durack Centre 263 Adelaide Terrace PERTH WA 6000
Tel: 1300 364 785
Fax: (08) 9268 1298
email: itsa.perth@itsa.gov.au
More information pamphlets are available.
See the website or contact ITSA for a complete list.
| 
