In the red – bankruptcy essentials part 2
21 Aug 2015
- Bankruptcy & Insolvency
- Dispute Resolution
The second part in our series on bankruptcy explores what happens to your assets in bankruptcy.
Declaring bankruptcy carries with it consequences and repercussions. Under the Bankruptcy Act, the bankruptcy trustee has the right to sell your unprotected assets and use the sale proceeds to pay off your debt.
What assets will I still own?
Once bankrupt, all of your unprotected assets come under the control of the trustee. However, secured creditors have a claim on the assets that they have financed if you have defaulted on your repayments. Further, certain assets are retained by you after you have declared bankruptcy which are referred to as protected assets and include things such as necessary household furniture and other personal effects, tools of trade up to a certain limit, life insurance and superannuation policies (subject to certain limits), compensation for personal injury and assets held by you in trust for another person.
Is my home protected?
If you have equity in your home the trustee has the right to sell it and contribute the sale proceeds (amount left over after sale costs and payment of mortgage) to your creditors. If your mortgage payments are in default, the creditor has the right to sell your home and recover their funds.
However, if the house is in joint names and only one of the owners has gone bankrupt, the non-bankrupt owner has the option to buy-out the bankrupt owner’s equity in the home and the other owner will not lose his/her share of equity.
Do I get to keep my car?
Once declared bankrupt you are able to keep one vehicle to the value of about $7,200.00 as long as it is used as your primary means of transport. If the car is worth more than this sum, it can be sold and the minimum sum given back to you.
If you need assistance with a bankruptcy, contact our dispute resolution lawyers.