Losing your house: Just how much do you understand about Bankruptcy in Perth?

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

The only reason you can be forced to sell your family home if you declare bankruptcy is actually due to the fact that you have a lot of equity in the home that it is regarded as an asset. Please read through these basic hypothetical case studies below to get your head around Bankruptcy and how it has an effect on houses in Australia. Remember If you have to know more regarding Bankruptcy and houses feel free to consult with us here at Fresh Start Solutions Perth on 1300 818 575, or check out our website: www.freshstartsolutions.com.au/bankruptcy-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 since they have massive debts of $80,000 on top of their mortgage and credit card and tax debt.

They really wish 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 home 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 nearby have sold for fairly recently.

Having said that 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 provided that it has not grown 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 modifying the land title deed etc.

Now let's have 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 does work in banking has a separate job and no other debt apart from the mortgage. Bill cannot pay his debts and so he is considering Bankruptcy. Michelle is concerned that she too may need to file for bankruptcy or be pushed into it as a result of the house loan.

Within 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. Have them sell the home. 2. Invite Michelle to buy Bills half of the equity. 3. leave them in the home - but It's very unlikely 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 have the opportunity 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 call us here at Fresh Start Solutions Perth on 1300 818 575, or check out our website: www.freshstartsolutions.com.au/bankruptcy-Perth.com.au.

Bankruptcy Perth, So what is the Deal with Debts?

Just what Debts are erased if I go Bankrupt?

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

But, simply put some of the exceptions are Centrelink Debts, Child Support, Court fines (like speeding fines) and also any debts arising from uninsured Motor-vehicle claims and educational debts which include HECS or FEE-HELP. These debts are not cleared away 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 actual security attached to it. So as an example if you buy a new car for $40,000 dollars the security for that car is the actual car itself.

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

 Yes. If you have a car loan for $40,000 you can have that debt wiped out if you simply return 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 could be wiped but the asset has to be sold or returned. This is just one facet that, when it comes to Bankruptcy, it is important to get professional advice - like that available at Fresh Start Solutions Perth.

What about my Tax Debts with the ATO can they be erased 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 kind of debts get some advice because it is not always so basic. Feel free to call us here over at Fresh Start Solutions Perth if you have any type of questions on 1300 818 575. Or feel free to visit our website: www.freshstartsolutions.com.au/bankruptcy-Perth.com.au

What about my business or Company debts?

 Sometimes when it concerns Bankruptcy we can aid you with your business debts, call us about this first. Remember bankruptcy applies to an individual not companies, trusts or businesses. Typically 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 Fresh Start Solutions Perth we specialise in business and personal debts so give us a call here at Fresh Start Solutions Perth if you have any questions regarding Bankruptcy on 1300 818 575. Or feel free to head to our website: www.freshstartsolutions.com.au/bankruptcy-Perth.com.au

Bankruptcy, Will I lose my Superannuation?

Bankruptcy in Australia can be complicated and perplexing. A question we typically get asked here over at Fresh Start Solutions Perth is 'what happens to my super if I file for Bankruptcy'? The answer for most is straightforward, if your super is simply in a regulated fund or industry fund like Sunsuper or Host Plus then very little happens; your super is 100 % safe when it comes down to Bankruptcy.

What if I have a Self Managed Super Fund?

This is a growing concern, think of the developing number of members of Self-Managed Super Funds ("SMSFs") in the last few years; the ATO tells us it has increased Australia-wide from 758,589 in 2009 to 1,011,689 in 2014. So what happens to these Superfunds when it comes to Bankruptcy?

Remember Fresh Start Solutions Perth is not proposing this article is the complete story, if you have any questions feel free to contact us on 1300 818 575. Regardless if you call us or another person it doesn't matter, just please don't walk into bankruptcy blind when it comes to your SMSF in truth we encourage you seek both legal and financial advice before proceeding with any of the actions suggested in this article.

What is a Disqualified Person?

First and foremost, if you are thinking about Bankruptcy, you can not be a part of a SMSF. Why? Because if you are confronting bankruptcy, you will be identified as a 'disqualified person'. And a disqualified person cannot operate as an Individual Trustee. This poses a problem since usually most of the SMSFs are just 2 people, which means each of these members must also be the individual trustees. The job of trustee poses a lot of legal rules, and if you are in this role I would highly recommend you to become familiar with them all-- for example the fact that you can not 'know or suspect' that one of you are bankrupt. So you can see how an individual bankruptcy can be quite harmful to a SMSF and as you can assume the process of Bankruptcy for a SMSF is rather convoluted.

How much time do I have so as to restructure my SMSF Fund once I'm bankrupt?

So what comes to pass if one of the members of an SMSF does enter Bankruptcy?

For starters, the SMSF will have to be restructured. This means that you will need to consider your whole structure and ensure that it is meeting the basic conditions, including things like having a new trustee that is not experiencing issues with Bankruptcy. The Australian Tax office will supply you a 6 month 'grace period' to get this done before you face penalties. And keep in mind, sometimes the best plan would be to simply roll the fund into an industry or corporate fund.

Beyond these large scale restructuring issues, there is a lot of paperwork to deal with too, and you need to be continuously keeping the ATO informed of what is happening. This means you ought to let them know that you have a bankruptcy issue with your current trustee, that they are being removed as soon as possible know who the new trustee/director is. The Bankrupt will also have to inform the ATO using the form NAT 3036 (Found on the ATO website) and they need to also notify ASIC of their resignation.

In the course of that 6 month period you will need to remove the Bankrupt from the SMSF-- including their property and assets. Remember if you are unsure call Fresh Start Solutions Perth for some free advice on 1300 818 575.

What if I have a single member fund?

If you are a single member fund, then you will need to appoint a new director, and it will then become their responsibility to oversee the sale and relocation of assets into a managed fund. If there are two or more members, than the bankrupt member will need to resign and the other member will clear away the property and halve the proceeds. They would then need to decide if they choose to remain as a single member SMSF, or if they want to roll it all into a managed fund. If both members are entering bankruptcy, then they would definitely need to sell all assets as soon as possible and transfer the liquid assets to the managed fund.

From that you can see how when it comes to Bankruptcy, even if one single member is running into issues, it can affect the very existence of an SMSF. If you are actually facing this matter yourself, or with a partner in a SMSF, please seek financial advice to make sure you are fulfilling the ATO requirements.

A simple solution ...

As I suggested earlier, a basic solution to your SMSF situation is to put your super back into a normal regulated managed fund before bankruptcy and save yourself all the problems outlined above. Bankruptcy is never easy, but finding proper advice is the best first step. If you want to discuss your options further, call us at Fresh Start Solutions Perth or visit our website: www.freshstartsolutions.com.au/bankruptcy-Perth.com.au or just give us a call on 1300 818 575.

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

Bankruptcy Perth is a difficult process, but I know from meeting with thousands facing the prospect of bankruptcy over the years, that not much worries people more than the notion of losing the family house. Almost everybody is psychologically connected to their home - it's where the children have grown, it's where you enjoy life on a day to day basis.

Will you lose your home if you go bankrupt? The reply is a resounding maybe. (not very useful, I know) People typically think it's an inevitable consequence and a part of Bankruptcy, and consequently 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 benefit 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 clearer idea.

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

Within that regulatory framework, the trustee is to help recover monies owed to your creditors, that is executed in a bunch of various 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 paying your debts.

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

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

You might wonder, why would the bank want bankrupt customers? wouldn't they choose to sell your house and not take the risk? The bank that has kindly lent you the money for your house is creating good money every month in interest out of you, month in month out, as long as you keep up to date with your repayments then the bank really wants you in there at all costs. Ultimately however it's not the bank's call if the trustee figures out that there is loads 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 document the value of your house and the portion 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 tips or a real estate agents advice to get to this figure. When you get a valuer out to your property, ensure you tell the valuer to value the property for a quick sale, make certain 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 delicate sale. Nowadays that's not the case, but if you meet them and tell them you need to sell the house in the next 30 days you may sway the result. The idea is that you want a realistic sell now figure.

There are two reasons this valuation technique is critical to you: one you will definitely have peace of mind ascertaining the market value of your house, then afterwards you can easily set up your equity position. Second of all, your home may be really worth even more than you thought. Get some assistance before doing this. The amount of times I've seen clients that have sold their family home of 20 years just to discover I could of helped them keep it;

 unfortunately this happens all too often

When it comes to Bankruptcy and houses, another major consideration is ownership, in most cases houses are bought in joint names. To puts it simply a couple may be a house 50/50 using both incomes to make the payments. If one party declares bankruptcy and the other party doesn't, the equity is only factored on the 50 % of the property.

When it concerns Bankruptcy, this is just one of potentially numerous scenarios that are likely when it comes down to the family home. Bear in mind the non-bankrupt party can buy the bankrupt's portion of the house in bankruptcy also. I have to repeat this but get some help on this area of Bankruptcy because it is very tricky and every single 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 contact Fresh Start Solutions Perth on 1300 818 575, or visit our website: www.freshstartsolutions.com.au/bankruptcy-Perth

Bankruptcy in Pert - Who exactly do I talk to?

Should I speak to my accountant about Bankruptcy?

The answer seems clear doesn't it: if anybody knows your financial circumstance 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 at heart when it comes to Bankruptcy, it's that his proficiency lie in helping you save you money at tax time, lowering your tax liability and lodging your BAS.

Most accounting degrees will put in hardly any to no time on insolvency, it's generally done as a post graduate specialty program for those who want to work in the field. Unless your accountant is an insolvency expert, he won't know that a lot about the effects of Bankruptcy, I can assure you insolvency specialists know much about tax returns or BAS in. If you do happen to find an insolvency accounting firm in Perth, they tend to be large firms with very nice offices who charge accordingly.

Should I talk with my Solicitor about Bankruptcy?

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

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

Should I speak with a financial counsellor about Bankruptcy?

Yes! There are a lot of financial counselling services to guide you through this, they have no hidden agendas and they're a marvellous option for really helping you analyze your situation when it comes to Bankruptcy. If you find yourself stressing 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 a fantastic service. They will be a sounding board if you just need a person to discuss with you what your choices are. Don't let your financial trouble destroy your life - in the end it's just money.

If you want to learn more about what to do, where to turn and what problems to ask about Bankruptcy, then feel free to speak to Fresh Start Solutions Perth on 1300 818 575, or visit our website: www.freshstartsolutions.com.au/bankruptcy-Perth

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

When people in Perth come to me wanting to discuss Bankruptcy, they are typically filled with 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 it clearer. One of the most regular worries is 'Will I lose my business if I declare bankruptcy?' The concise answer is no. If you are an owner of a company any shape or size you can keep your business if you want to. In Perth, businesses that are insolvent have a few options for example, liquidation, voluntary administration and so on. It's people who go bankrupt not businesses.

Bankruptcy is a complicated area so get some qualified advice on this one if you have a business. Generally speaking, the financial obligations in a business and personal debts go hand in hand when a business owner declares bankruptcy. There are some vital 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 definitely need to retire as a director after you're bankrupt.

A limitation that applies when you are generally bankrupt as a business owner is that you can be in your own business as a sole trader only. Generally there are things you have to disclose as a part of that but in essence you can still run your company. For some business owners, bankruptcy affects their ability to run the business because of the licensing issues. For example, if you run a building company, your license will be suspended once you're bankrupt and consequently you can no longer trade without that license, so make sure you are asking the right questions when it involves licenses and Bankruptcy in Perth.

But if your business is not impacted directly by such issues, then you'll will 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 rack up heaps of debt in your company, then go bankrupt then open the doors the next day like nothing at all had happened. There are laws in place to avoid what is called phoenix companies growing out of the ashes of an old company.

Having said that, it's just a point of speaking to the best people about Bankruptcy. In this situation you may believe you need a liquidator for your company, and you might be right, but remember that every liquidator is unique and have their own motives. Liquidators make money from your liquidation - heaps of money - so what advice do you think you will get?

When it comes to Bankruptcy, I think that giving generic advice in this area is potentially perilous as it can have very significant implications for directors and business owners. This is since it is one of those cases where what the right guidance for one business owner is the incorrect advice for the other. There are some fundamentals however, that you may benefit from. There is no reduce to the size of the business you run even though you are bankrupt. You can employ staff. You can continue to deal with your companies 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 too worried about what you can and can't do as a business owner, just get the right advice ... If you want to learn more about what to do, where to turn and what questions to ask about Bankruptcy, then feel free to speak with Fresh Start Solutions Perth on 1300 818 575, or visit our website:.freshstartsolutions.com.au/bankruptcy-Perth

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

When it comes to Bankruptcy Perth, typically people aren't aware that there can be both voluntary, and involuntary bankruptcy - both have unique approaches and policies.

Involuntary bankruptcy takes place when somebody you owe money to applies to the court to declare you bankrupt. Commonly when you get one of these notices, you have 21 days to pay all the debt. If you do not, then the creditor goes back to the court and asks the court to provide a sequestration order that declares you bankrupt. A trustee is assigned, and then you have 14 days to get the paperwork in and then you are bankrupt.

You can object to a bankruptcy notice by going to court after 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 difference between Involuntary Bankruptcy and or Voluntary Bankruptcy - once you are declared bankrupt, they're administered to in the exact same way.

However, when it comes to Bankruptcy for this, the stress and anxiety, torment and fear that accompanies this method is incredible. If you think you are prone to be made bankrupt by someone, get some help and act on that advice. Generally I've found it's always more effective to know what you can and can't do before you have an individual bankrupt you. Once you are bankrupt, it's typically far too late.

Voluntary Bankruptcy

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

This question is not the very same for every person of course, but normally I find that one way you could work it out is to figure out how long it will take you to pay each of your debts - if its longer than 3 years (the period you are declared bankrupt), then this may serve to 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 level she was paying her account, and it was 35 years! Imagine 35 years for one credit card bill.

Credit rating damage can 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 affect how you need to approach Bankruptcy.

In many ways, the ease with which companies/credit providers can default your credit file is improper. The punishment doesn't seem to amount to the crime in my book. So if you currently 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 factor in trying to decide whether to participate 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 part most people are afraid of when they come to me to go over their financial situation and Bankruptcy. The other side of crime and punishment equation is bankruptcy, and in this specific 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. As compared to countries like the United States, our bankruptcy laws are quite generous.

I don't claim to know why that is but a couple of hundred years ago debtors went to prison. Nowadays I suppose the government feels 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 of 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 actually insured.

There is a lot more that can be said about doing this and Bankruptcy in general but the purpose of this blog was to help you decide between a few available options. When getting some advice, bear in mind that there are always choices when it involves Bankruptcy in Perth, so do some homework, and Good luck!

If you would like to learn more about exactly what to do, where to turn and what questions to ask about Bankruptcy, then don't hesitate to check with Fresh Start Solutions Perth on 1300 818 575, or visit our website:freshstartsolutions.com.au/bankruptcy-Perth