Losing your house: How much do you know of Bankruptcy in Perth?

The most significant question a lot of people have when they come to our company regarding Bankruptcy is certainly 'Can I manage to keep my house?' and in many cases the truth is yes, you can keep your house.

The only reason you may be forced to sell your family home when you declare bankruptcy is actually due to the fact that you have a great deal of equity in the house that it is deemed an asset. Please go over these basic hypothetical case studies below to get your head around Bankruptcy and how it impacts houses in Australia. Remember If you need to know more about Bankruptcy and houses feel free to consult with us here at Bankruptcy Advice Perth on 1300 879 867, or go to our website: www.bankruptcy-advice.com.au/Perth.com.au

Case Study 1. (Mike & Sue Smith).

5 years ago Mike and Sue bought a house in a mining town for $450,000. At this time the mining boom was keeping all the property prices nice and high. Now they are needing to look at Bankruptcy given that they have huge debts of $80,000 on top of their mortgage and credit card and tax debt.

They really want to keep their house but wonder if they can, they know that house prices if anything have gone down in the area in the last 5 years so to be safe they think that their house is currently only worth $450,000 after all these years, to make sure they searched www.realestate.com.au/ sold section of the website to see what other homes in the streets close by have sold for fairly recently.

Unfortunately they have not paid any principal of the home loan over the last 5 years, mainly just interest, so they still owe $450,000.

Current House Value = $450,000.

Current Mortgage Value = $450,000.

Net Equity Value = $0.

Because there is no equity in this property the trustee will not ask Mike and Sue to sell their home when they go bankrupt, as long as they keep up the mortgage payments then all will be well for these people for the 3 years they are in bankruptcy.

At the end of the bankruptcy period of time the trustee will write to them and ask if they wish to take over ownership of their house again and so long as it has not increased in price over the 3 years they have been bankrupt they will be asked to make an offer to have their house back. This is usually somewhere between $3,000 and $5,000 to cover the legal costs of altering the land title deed etc.

Now let's take a look at a slightly different example of Bankruptcy and houses.

Case Study 2. (Bill & Michelle Johnson).

2 years ago Bill and Michelle bought a townhouse in a wonderful suburb of Perth for $850,000 they tipped in $50,000 as a deposit and now the townhouse two years later is worth $900,000.

Current House Value = $900,000.

Current Mortgage Value = $800,000.

Net Equity Value = $100,000.

As a result of a recent business failure Bill is about $240,000 in debt. Michelle who works in banking has a separate job and no other debt other than the mortgage. Bill cannot pay his debts and so he is looking into Bankruptcy. Michelle is worried that she too may need to declare bankruptcy or be forced into it due to the house loan.

In this particular case the trustee is required to access or get their hands on Bill's half of the equity which is $50,000 less selling costs. They might do this in a few ways; 1. Make them sell the home. 2. Invite Michelle to buy Bills half of the equity. 3. leave them in the home - but It's very improbable in this particular case that the trustee would be happy to leave Bill and Michelle in the house because there is just too much equity.

So Michelle may be capable to purchase Bill's share of the equity by coming up with $50,000 and buying out Bills' half and from that moment its now 100 % Michelle's house.

Property and Bankruptcy in Australia is confusing and demanding, these two case studies above are just the tip of the iceberg as far as your options in Perth are concerned. If you need to know more about Bankruptcy and houses feel free to contact us here at Bankruptcy Advice Perth on 1300 879 867, or head to our website: www.bankruptcy-advice.com.au/Perth.com.au.

Bankruptcy Perth, What is the Deal with Debts?

What Debts are wiped out if I go Bankrupt?

The practical answer is that when it concerns Bankruptcy most debts are wiped, and I have featured a table below for you to look at.

But, put simply some of the exceptions are Centrelink Debts, Child Support, Court fines (like speeding fines) in addition to any debts arising from uninsured Motor-vehicle claims and educational debts like HECS or FEE-HELP. These debts are not wiped out when you file for bankruptcy.

What about Secured Debts?

A secured debt is a vehicle loan or a home loan; it is a debt that has some real security linked to it. So for instance if you buy a new car for $40,000 dollars the security for this car is the actual car itself.

So, can my secured debts be erased if I file for bankruptcy?

Yes. If you have a car loan for $40,000 you can have that debt eliminated if you simply hand back the car. So the lesson is that you cannot have your cake and eat it too (so to speak), so yes all of your secured debts may be wiped but the asset has to be sold or returned. This is just one part that, when it comes to Bankruptcy, it is essential to get professional help - like that available at Bankruptcy Advice Perth.

What about my Tax Debts with the ATO can they be removed If I go bankrupt?

Yes they can, both business and personal debts owing to the ATO can be eliminated with bankruptcy. If you have a business with any sort of debts get some advice because it is not always so easy. Feel free to call us right here at Bankruptcy Advice Perth if you have any questions on 1300 879 867. Or feel free to explore our website: www.bankruptcy-advice.com.au/Perth.com.au

What about my business or Company debts?

In some cases when it involves Bankruptcy we can really help you with your business debts, call us about this first. Remember bankruptcy applies to an individual not companies, trusts or businesses. Generally you may need to liquidate a company to deal with the debt that way. When it comes to Bankruptcy, it can be a complicated area, so remember there are implications for a business owner such as insolvent trading. At Bankruptcy Advice Perth we specialise in business and personal debts so call us here at Bankruptcy Advice Perth if you have any questions regarding Bankruptcy on 1300 879 867. Or feel free to go to our website: www.bankruptcy-advice.com.au/Perth.com.au

Bankruptcy in Perth - Will I lose my home if I go bankrupt?

Bankruptcy Perth is a challenging process, but I know from meeting with thousands facing the likelihood of bankruptcy over the years, that practically nothing troubles people more than the idea of losing the family home. Almost everyone is psychologically connected to their home - it's where the kids have grown up, it's where you enjoy life on a day to day base.

Will you lose your home if you go bankrupt? The response is a resounding maybe. (not very helpful, I know) People typically feel that it's an inevitable consequence and a part of Bankruptcy, and because of this push themselves to the brink of insanity to not lose the family home. But when it comes to the whole process of Bankruptcy, a key perk of Debt Agreements and Personal Insolvency Agreements is you can keep your house. The reason is simple: you've agreed to pay back the debt you are in.

So how is it possible to keep my Perth house, you ask? It's easier if I explain the basic principle behind the Bankruptcy process as administered by the trustee, then you'll have a more clear picture.

The role of the bankruptcy trustee is to firstly abide by the regulation of the bankruptcy act 1966 (it's a very boring read about 600 pages if you are interested).

Within that regulatory framework, the trustee is to help recuperate monies owed to your creditors, that is executed in a bunch of distinct ways but it mainly comes down to income and assets. The trustees role is to collect payments over your income threshold. The other role is to sell any assets that can contribute to repaying your debts.

What this seems is that yes the trustee will sell your house right? Not normally. The only reason the trustee will sell off any asset including your house is to get money to repay your debts. If there is no equity in your home then it's pointless to sell your home. This is happening increasingly since the GFC as house prices in many locations have been heading south so what you paid 4 years ago may not automatically reflect the price today.

A quick word of advice here if you have a house in Perth and are looking at Bankruptcy: get a professional to help you through this process, there are loads of variables in these scenarios that have to be considered.

You might wonder, why would the bank want bankrupt clients? wouldn't they like to sell your house and not take the risk? The bank that has generously lent you the money for your house is creating good money every month in interest out of you, month in month out, provided you keep up to date with your payments then the bank wants you in there at all costs. Ultimately however it's not the bank's call if the trustee determines that there is lots of equity in your house the trustee will force you and the bank to sell the house.

When you file for bankruptcy you are asked to write down the value of your house and the amount you owe on the house. A tip if you are trying to work out the value of your house: use a registered valuer as this will offer you peace of mind, don't use your neighbours' gut feel advice or a real estate agents advice to arrive at this figure. When you get a valuer out to your house, make certain you tell the valuer to value the property for a quick sale, ensure you mow the lawn and don't leave the kitchen in a mess also.

Valuers used to provide two valuations: one for a quick sale and one for a well marketed non time sensitive sale. These days that's not the case, but if you meet them and tell them you need to sell your home in the next 30 days you may control the result. The idea is that you want a sound sell now figure.

There are two reasons this valuation process is critical to you: one you will have peace of mind ascertaining the market value of your house, then afterwards you can easily build your equity position. The second thing is, your home may be really worth much more than you thought. Get some guidance before doing this. The number of times I've met clients that have sold their family home of 20 years only to learn I could of helped them keep it; unfortunately this happens all too often

When it concerns Bankruptcy and houses, another primary consideration is ownership, often houses are bought in joint names. Simply put a couple may be a house 50/50 using both incomes to make the payments. If one party declares bankruptcy and the other party does not, the equity is only factored on the 50 % of the property.

When it comes to Bankruptcy, this is just one of probably hundreds of scenarios that are likely when it relates to the family home. Bear in mind the non-bankrupt party can buy the bankrupt's part of the house in bankruptcy also. I have to repeat this but get some guidance on this area of Bankruptcy because it is very tricky and each and every case is different.

If you want to learn more about what to do, where to turn and what questions to ask about Bankruptcy, then feel free to talk to Bankruptcy Advice Perth on 1300 879 867, or visit our website: www.bankruptcy-advice.com.au/Perth.

Bankruptcy in Perth - Who exactly do I talk to?

Should I talk with my accountant about Bankruptcy?

The answer seems obvious doesn't it: if anybody knows your financial situation well in Perth, It's going to be your accountant. However, the short answer is a resounding No! It's not that your accountant may not have your best interests in mind when it comes to Bankruptcy, it's that his knowledge lie in helping you save you money at tax time, minimising your tax liability and lodging your BAS.

Most accounting degrees will put in hardly any to no time on bankruptcy, it's generally done as a post graduate specialty course for those who intend to work in the field. Unless your accountant is an insolvency specialist, he will not know that a lot about the implications of Bankruptcy, I can guarantee you insolvency specialists know much about tax returns or BAS in. If you do manage to find an insolvency accounting firm in Perth, they tend to be large firms with very nice office spaces who charge accordingly.

Should I speak with my Solicitor about Bankruptcy?

No! You can speak with your solicitor in Perth but more than likely it won't do you much good. Solicitors are really good at doing things lawyers do, like helping you do your Will and buying your house and trying to keep you out of court if you're lucky. When it relates to Bankruptcy, the specialists in Perth generally have either a legal or accounting background, and the reason for that is simply that you can't enrol in the post graduate study to become a qualified insolvency practitioner unless you have a law or accounting degree.

Just like there are a couple of insolvency accounting firms, there are very few insolvency legal practices in Australia, and yes if you locate one you will pay a sizeable price for their expertise.

Should I speak with a financial counsellor about Bankruptcy?

Yes! There are lots of financial counselling services that can help you with this, they have no hidden agendas and they're a delightful option for really helping you analyze your situation when it comes to Bankruptcy. If you are stressing out constantly, not sleeping, not eating or over-eating and thinking of money pressures at all times, then get some help.

There are also charitable organizations around Perth like Lifeline that offer an excellent service. They will be a sounding board if you just need somebody to review with you what your choices are. Don't let your financial issue destroy your life - ultimately it's just money.

If you like to learn more about what to do, where to turn and what questions to ask about Bankruptcy, then feel free to contact Bankruptcy Advice Perth on 1300 879 867, or visit our website: www.bankruptcy-advice.com.au/Perth .

Bankruptcy in Perth - Will I lose my business if I go bankrupt?

When people in Perth come to me looking to talk about Bankruptcy, they are typically full of questions. The internet has plenty of information, but far too much of it is confusing or contradicts itself, so I make it my mission to try and make things clearer. One of the very most natural matters is 'Will I lose my business if I declare bankruptcy?' The short answer is no. If you are an owner of a business any shape or size you can keep your business if you want to. In Perth, businesses that end up being insolvent have a few options just like liquidation, voluntary administration and so on. It's people who go bankrupt not companies.

Bankruptcy is a complex area so get some professional advice on this if you have a business. Generally speaking, the financial obligations in a business and personal debts go together when a business owner goes bankrupt. There are some crucial implications for directors of companies when it comes to Bankruptcy in Perth: A bankrupt can not be a director of a company, so if you have a pty ltd company you will need to retire as a director after you're bankrupt.

A restriction that applies when you are generally bankrupt as a business owner is that you may be in your very own business as a sole trader only. There are things you have to make known as an aspect of that but basically you can still run your company. For some business owners, bankruptcy affects their ability to run the business because of the licensing issues. As an example, if you run a building company, your license will be suspended once you're bankrupt and therefore you can no longer trade without that license, so make sure you are asking the ideal questions when it comes to licenses and Bankruptcy in Perth.

Having said that if your business is not impacted directly by such issues, then you'll need to restructure the way you run your business. There are considerations when and if you go bankrupt as a business owner: you can not acquire heaps of debt in your business, then go bankrupt then open the doors the next day like almost nothing had happened. There are laws in place to stop what is called phoenix companies appearing out of the ashes of an old business.

Having said that, it's just a point of talking with the best people about Bankruptcy. Here in this circumstance you may believe you need a liquidator for your business, and you may be right, but bear in mind that every liquidator is different and have their own motives. Liquidators profit from your liquidation - heaps of money - so just what advice do you think you will get?

When it comes to Bankruptcy, I consider that giving generic advice in this area is potentially damaging as it can have very considerable implications for directors and business owners. This is due to the fact that it is just one of those cases where what the right advice for one business owner is the incorrect advice for the other. There are some fundamentals however, that you may benefit from. There is no restriction to the size of the business you run when you are bankrupt. You can employ staff. You can continue to deal with your distributors under certain conditions, the main one being you will need to meet the payment terms agreed upon.

So when it comes to Bankruptcy, don't get extremely worried about what you can and can't do as a business owner, just get the best advice ... If you wish to learn more about what to do, where to turn and what questions to ask about Bankruptcy, then feel free to get in touch with Bankruptcy Advice Perth on 1300 879 867, or visit our website: www.bankruptcy-advice.com.au/Perth .

Bankruptcy in Perth - does it matter if it is voluntary?

When it comes to Bankruptcy Perth, often people aren't aware that there may be both voluntary, and involuntary bankruptcy - the two have distinct methods and guidelines.

Involuntary bankruptcy takes place when a person you owe money to involves the court to declare you bankrupt. Normally when you get one of these kinds of notices, you have 21 days to pay all the debt. If you don't, then the creditor goes back to the court and asks the court to issue a sequestration order that declares you bankrupt. A trustee is appointed, and then you have 14 days to get the documentation in then afterwards you are bankrupt.

You can challenge a bankruptcy notice by going to court following the 21 days have expired and put your case forward, to prevent it going to the next level. Apart from the way you became bankrupt there is in reality no distinction between Involuntary Bankruptcy and or Voluntary Bankruptcy - once you are simply declared bankrupt, they're managed to in the very same way.

However, when it concerns Bankruptcy for this, the stress and anxiety, torment and fear that accompanies this method is incredible. If you think you are more than likely to be made bankrupt by someone, get some guidance and act on that advice. Generally I've found it's always more ideal to know what you can and can't do before you have somebody bankrupt you. Once you are bankrupt, it's generally too late.

Voluntary Bankruptcy

Nevertheless, when it comes to Bankruptcy, sometimes there are moments that it is the best option. So you may have to ask yourself, 'when should I consider voluntary Bankruptcy?'.

This question is not the very same for everybody of course, but ordinarily I find that one way you could work it out is to figure out how long it will take you to pay every one of your debts - if its longer than 3 years (the period you are declared bankrupt), then this may help you make that decision, and help you to understand Bankruptcy.

Once, I had an 80 year old pensioner, who came to me once regarding * Bankrupcty tell me that her credit card statement calculated how long her debt would take to pay at the rate she was paying off her account, and it was 35 years! Imagine 35 years for one credit card bill.

Credit rating damage can really help you think this through. If you move house and forget to pay your $30 phone bill for 6 months more, it's very likely the phone company will default your credit file. That default will sit on your file for 5 years, so for $30 you can have your credit file very seriously damaged for that period of time - and all of this will impact how you need to approach Bankruptcy.

In many ways, the ease with which companies/credit providers can default your credit file is not fair. The punishment doesn't seem to amount to the crime in my book. So if you actually have defaults on your credit report for 5 years, keep in mind that bankruptcy is on your credit file for a total 7 years then its rubbed out completely.

So if your credit rating is a big aspect in trying to decide whether to take part in a Debt Agreement or Personal Insolvency Agreement or Bankruptcy remember they will all sit on your credit file for a total of 7 years. The biggest variation is that with a DA or PIA you repay the money and nevertheless have it on your file for 7 years.

Bankruptcy

I have talked about the word a few times now, but when it comes down to it, Bankruptcy is the biggest part, and the element more people are afraid of when they come to me to review their financial situation and Bankruptcy. The other side of crime and punishment equation is bankruptcy, and in this country the arrangements are very generous: you can go bankrupt owing millions of dollars and after 3 years it's all over with no strings attached. Compared to countries like the United States, our bankruptcy laws are quite reasonable.

I don't pretend to know why that is but a couple of hundred years ago debtors went to prison. Nowadays I suppose the government thinks the sooner it can get you back on your feet working and paying tax, the better. It makes more sense than locking you up which in turn costs the taxpayer anyway.

Bankruptcy wipes all your debts including ATO debts except for a few things:

·         Centrelink Debts, Court Fines like parking and speeding fines.

·         HECS or Fee Help loans.

·         Money to take care of a car accident if the car was not insured.

There is much more that can be said about doing this and Bankruptcy in general but the objective of this blog was to help you decide between a few possible options. When getting some advice, bear in mind that there are always alternatives when it concerns Bankruptcy in Perth, so do some research, and Good luck!

If you wish to find out more about precisely what to do, where to turn and what questions to ask about Bankruptcy, then feel free to talk to Bankruptcy Advice Perth on 1300 879 867, or visit our website:bankruptcy-advice.com.au/Perth.

Bankruptcy in Perth - Will my income be affected if I go bankrupt?

Bankruptcy Perth is a confusing process, and you have to make sure you get the right suggestions. And when it comes to your income being affected, the answer to the question is maybe. The first thing you have to know about going bankrupt is there is no restraint on how much you can earn. However, I will point out that your income is a significant consideration when working through when it comes to Bankruptcy.

The very first thing you need to learn about this area of Bankruptcy is just how much you can earn before you start paying back money to your creditors via your trustee (see table below).

Net income is the pre-tax/ in the hand amount of money you earn per year. A dependant is someone who lives with you and earns less than $3,124 per year (regardless of their age).

You can get a hardship variation that raises the threshold amount, if you have financial commitments in Perth such as medical, child care, substantial travel to and from your job, or a situation where your spouse used to work but is not able to support the household income.

Some of the insightful parts of Bankruptcy is that your employer will not be alerted when you file for bankruptcy. Also, Child support is always taken into account in bankruptcy, if you receive child support that is not factored in as income. If you pay child support this will be also considered, for example if you give $5,000 child support each year and you have no dependents living with you then your revised net income limit will be $55,332.10.

There are a lot more issues covering income and what is or isn't considered income - if you're not exactly sure, it's ideal to get skilled advice. The reason you must consider your income as a part of the Big 5 questions here is that bankruptcy is in some instances not an economically practical option.

If one of your creditors is the ATO (for unpaid taxes), then your tax refund can be taken by the ATO while you are bankrupt to contribute toward your tax bill. If you don't have a tax bill then you will keep your tax refund provided that doesn't take you over your threshold income limitations.

If you think when it comes to Bankruptcy, your situation is more challenging, then just get qualified advice in Perth. I may seem like a broken record, but bear in mind that it's always a good idea to overcome these options before declaring bankruptcy, since once you have filed the paperwork it's too late to change your mind.

If you wish to learn more about what to do, where to turn and what issues to ask about Bankruptcy, then feel free to contact Bankruptcy Advice Perth on 1300 879 867, or check out our website: bankruptcy-advice.com.au/Perth .