Can I own anything?
What will I still own?
Ok, you know now that once you have filed for bankruptcy, all your debts are owed by the bankrupt estate. They are in the bucket, you are debt free. I have previously mentioned that the bankrupt estate (bucket) may also collect some of your assets and income whilst you are bankrupt so now let’s look at what assets you can keep and how your life will work once you are bankrupt.
You need to be across what assets and income you can keep to be able to work out how you will take your life forward.
Will I lose my house?
When I first considered bankruptcy a major stress for me was that I would lose my house. For me, my home represented everything that I had worked for!
I was surprised when I learnt that it was possible for me to remain living in my home – I had options. I was not forced to ‘pack up and move out’, but had the option to source a family member or friend to buy the house from the Bankruptcy Trustee at valuation. With the help of a family member or friend, I would be able to keep living in my home.
I explored this option with members of my family but they were concerned they would become entangled with my financial problems. After meeting with their solicitor they were assured that by buying the house from the Bankruptcy Trustee they would receive good title to the house and be safe.
For me, once I had fully digested bankruptcy and options how my life would work going forward, I decided to move to a different location and not worry about keeping my house. What I would say is that exploring keeping the house was part of my recovery and working out how I wanted my life to work.
When exploring keeping my home I also learned that my ownership in my home may be varied if other persons contributed to my purchase of the property. Also, if my property is jointly owned and I had increased the mortgage at any time and used the money to pay for other things, that could cause my ownership to be varied.
It can all get a bit complicated, but if you wish to explore what can be done to help and give you the option to remain living in your home, give me a call on 1300 764 197 or email firstname.lastname@example.org. I am more than happy to help you work out the options that are available to you.
I should also mention that persons who have monies from a personal injury can use that money to save their house and retirees can use monies they have in their superannuation fund to save their house, provided they are bankrupt before the money from their superannuation fund is accessed.
Will I have to rent?
I often receive calls from people, concerned that they will have trouble renting a property once they are bankrupt. I do not think it is the case of not being able to rent a property but possibly the process of obtaining a rental may take a little bit longer. In particular, those persons going from owning their own home to renting as they will have no rental references.
My tips, if you need to find a rental property are:
- Make sure all your utility bills (eg electricity) are paid up to date, so as those services can be transferred to your new rental property.
- Make sure you have the money for the bond and the first two weeks rent
- Make sure you can afford the rent and live comfortably going forward. Financial stress must be a thing of the past.
- If you are downsizing, sell the excess furniture before moving to the rental. If you sell your furniture after you are bankrupt, you keep the money from the sale.
Do I get to keep my furniture?
The short answer? Yes. Rest assured that you keep your household furniture and effects. That’s right: clothes, furniture, kitchen appliances, washing machine, the TV and the stereo, and items mainly used by any children or students in the house.
The only type of item from your home that you would have to put in the bucket would be something like antique furniture or a work of art. The leather lounge from Harvey Norman is safe.
That being said, don’t rush out and buy a new fridge or something similar on your store card and then go bankrupt. Something that blatant could be viewed as fraud and severe penalties can apply. Be honest in all of this. If you’re thinking about bankruptcy, use common sense, not your credit cards. If your furniture is rented, keep up your rental repayments if you want to keep that item of furniture.
However, if you have items such as boats, caravans, or classic cars in the garage, they will be sold by your Bankruptcy Trustee. If this causes you concern, I recommend that you talk to your Trustee and organise for a family member to buy them at auction valuation. Bankruptcy also puts an end to shares and other investments but remember your super is safe. You cannot own any of these things until after you have been discharged from bankruptcy.
What about my car?
The other important item to think about is transport, and in this day and age transport can also be about your safety. Don’t worry. You can keep vehicles worth up to $8,100 at auction value, or if it is still on finance, it can be worth up to $8,100 more than the amount you owe.
If you’re not sure about the value of your vehicle, go to the industry website (www.redbook.com.au) and check out the ‘Trade In Price Guide’ amount – that’s quite close to auction value. If you still have concerns, give me a call on 1300 764 197 or email email@example.com and I will explore what can be done to help you.
In reality, cars are rarely worth enough (auction value) for your Trustee to claim them and put the proceeds in the ‘bucket’. If you still owe any money on the vehicle that is particularly true, because the bit you actually own – if any – has to be worth more than $8,100 and it rarely is.
If the car is owned by two people – say, husband and wife – and you both go bankrupt, you can have a car that is worth up to each.
Here’s an example that might explain things a bit more clearly. Your car is worth $20,000 auction value but you still owe $16,000 on it, so your equity is $4000. That’s under the $8,100 cut-off point so your Trustee won’t take the car. Naturally, your payments must be up-to-date when you declare bankruptcy, and you must keep paying.
If the car is only worth $12,000 and you owe $15,000 on it, your equity is a minus figure ($3000), so the car is yours to keep. Again, the payments must be up-to-date and stay that way.
However, if your car is worth $20,000 but the $16,000 you owe is through an unsecured loan, then for bankruptcy purposes, you have a car worth $20,000. Your trustee would sell the car and give you $8,100 of the proceeds to buy another vehicle. The balance goes into the ‘bucket’ for distribution to your creditors.
I need my tools to work!
If you have tools to do your job – your tools of trade, you can keep them up to an auction value of $3,800.
From my experience, second-hand tools don’t fetch much at auction these days, so your tools should be covered by this allowance. If not, it’s another thing I can help you with. If you would like to have a chat about this please call me on 1300 764 197 or email firstname.lastname@example.org.
- You may be able to remain living in your home, depending on your circumstances and/or support from family or friend
- To rent a house/unit once bankrupt it could take longer than normal
- Your normal household furniture and effects are safe
- You can have cars up to the value of $3,800
- Ok, we have covered your housing, furniture, transport and tools of trade. You should be good to go forward and start living without debt. If you have any other assets that you would like to discuss, give me a call on 1300 764 197 or email email@example.com.
The next article that follows on nicely from this article is Types of Debt Covered by Bankruptcy. We have covered what assets are protected for you, so let’s now check whether all your debts will be removed by bankruptcy. This article can be accessed here
If you are involved or could become involved in Family Law proceedings we recommend you read our article Bankruptcy and Family Law for the effect Family Law will have on assets that are protected by your bankruptcy. This article can be accessed here