Losing your house: Just how much do you know of Bankruptcy in Melbourne?

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

The only reason you will 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 regarded as an asset. Please read through these straightforward hypothetical case studies below to get your head around Bankruptcy and how it affects houses in Australia. Remember If you need to know more about Bankruptcy and houses feel free to call us here at Fresh Start Solutions Melbourne on 1300 818 575, or visit our website: www.freshstartsolutions.com.au/bankruptcy-Melbourne.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 helping keep all the property prices nice and high. Now they are needing to look at Bankruptcy because they have massive 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 home is still 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 houses in the streets close by 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 particular property the trustee will not ask Mike and Sue to sell their house 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 purchased a townhouse in a wonderful suburb of Melbourne 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 failing Bill is about $240,000 in debt. Michelle who does work in banking has a separate job and no other debt except for the mortgage. Bill cannot pay his debts therefore he is looking at Bankruptcy. Michelle is concerned that she too may need to declare bankruptcy or be pushed into it due to the house loan.

With this particular case the trustee is required to access or get their hands on Bill's part 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 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 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 challenging and complicated, these two case studies above are just the tip of the iceberg as far as your options in Melbourne are concerned. If you need to know more about Bankruptcy and houses feel free to call us here at Fresh Start Solutions Melbourne on 1300 818 575, or head to our website: www.freshstartsolutions.com.au/bankruptcy-Melbourne.com.au.

Bankruptcy Melbourne, Just what is the Deal with Debts?

Which Debts are eliminated if I go Bankrupt?

The straightforward answer is that when it comes to Bankruptcy most debts are wiped, and I have included 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 even any debts arising from uninsured Motor-vehicle claims and educational debts which include 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 absolute security linked to it. So for example 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 eliminated if I file for bankruptcy?

Yes. If you have a car loan for $40,000 you can have that debt cleared away 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 can 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 offered at Fresh Start Solutions Melbourne.

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

Yes they can, both business and personal debts owing to the ATO can be cleared away with bankruptcy. If you have a business with any sort of debts find some advice because it is not always so self-explanatory. Feel free to call us here at Fresh Start Solutions Melbourne if you have any type of questions on 1300 818 575. Or feel free to check out our website: www.freshstartsolutions.com.au/bankruptcy-Melbourne.com.au

What about my business or Company debts?

Sometimes when it involves 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. Normally you may have to liquidate a company to deal with the debt that way. And when it comes to Bankruptcy, it can be a confusing area, so remember there are implications for a business owner such as insolvent trading. At Fresh Start Solutions Melbourne we specialise in business and personal debts so give us a call here at Fresh Start Solutions Melbourne if you have any questions about Bankruptcy on 1300 818 575. Or feel free to check out our website: www.freshstartsolutions.com.au/bankruptcy-Melbourne.com.au

Bankruptcy, Will I lose my Superannuation?

Bankruptcy in Australia can be involved and perplexing. A question we often get asked here over at Fresh Start Solutions Melbourne is 'what happens to my super if I file for Bankruptcy'? The reply for most is simple, if your super is normally in a regulated fund or industry fund like Sunsuper or Host Plus then absolutely nothing 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, take into consideration the expanding number of members of Self-Managed Super Funds ("SMSFs") lately; 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 concerns Bankruptcy?

Remember Fresh Start Solutions Melbourne is not indicating this short article is the complete story, if you have any questions feel free to get in touch with us on 1300 818 575. Whether you call us or someone else it doesn't matter, just please don't walk into bankruptcy blind when it comes to your SMSF in fact we suggest you look for both legal and financial advice before proceeding with any of the actions recommended 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 coping with bankruptcy, you will be grouped as a 'disqualified person'. And a disqualified person cannot operate as an Individual Trustee. This poses a problem because usually most of the SMSFs are just 2 people, which means the two of these members must also be the individual trustees. The position of trustee poses a lot of legal rules, and if you are in this role I would highly encourage you to end up being knowledgeable about them all-- including 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 very destructive to a SMSF and as you can imagine the process of Bankruptcy for a SMSF is rather convoluted.

How much time do I have to restructure my SMSF Fund after I'm bankrupt?

So what takes place 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 have to consider your over-all structure and make certain it is meeting the basic conditions, involving having a new trustee that is not having 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 frequently keeping the ATO informed of what is happening. This means you ought to let them know that you have a bankruptcy problem 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 will need to also notify ASIC of their resignation.

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

What if I use a single member fund?

If you are a single member fund, then you will need to appoint a new director, and it will then be their responsibility to oversee the sale and transfer 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 take away the property and halve the proceeds. They would then have to decide if they wish to remain as a single member SMSF, or if they need to roll it all into a managed fund. If both members are entering bankruptcy, then they will need to sell all assets at once and transfer the liquid assets to the managed fund.

From that you can notice how when it comes to Bankruptcy, even when one single member is dealing with issues, it can affect the very existence of an SMSF. If you are right now 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 simple solution to your SMSF situation is to put your super back into a normal regulated managed fund before bankruptcy and save yourself all the frustrations outlined above. Bankruptcy is never easy, but receiving proper advice is the best initial step. If you want to discuss your options further, contact us at Fresh Start Solutions Melbourne or visit our website: www.freshstartsolutions.com.au/bankruptcy-Melbourne.com.au or just give us a call on 1300 818 575.

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

Bankruptcy Melbourne is a complex process, but I know from meeting with thousands facing the prospect of bankruptcy over the years, that nothing worries people more than the thought of losing the family house. Almost everybody is psychologically connected to their home - it's where the children have grown up, it's where you enjoy life on a day to day basis.

Will you lose your home if you go bankrupt? The solution is a resounding maybe. (not very helpful, I know) People typically assume it's an inevitable consequence and a part of Bankruptcy, and therefore 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 advantage 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 Melbourne house, you ask? It's easier if I explain the basic theory behind the Bankruptcy process as administered by the trustee, then you'll have a more clear image.

The responsibility of the bankruptcy trustee is to firstly follow the regulation of the bankruptcy act 1966 (it's a very dull read about 600 pages if you are curious).

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

What this sounds like is that yes the trustee will sell your house right? Not necessarily. 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 house then it's pointless to sell your home. This is happening much more since the GFC as house prices in many regions 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 Melbourne and are looking at Bankruptcy: get an expert to help you through this process, there are plenty of variables in these scenarios that need to be considered.

You might wonder, why would the bank want bankrupt clients? wouldn't they prefer to sell your house and not take the risk? The bank that has nicely lent you the money for your house is earning good money every month in interest out of you, month in month out, so long as you keep up to date with your monthly payments then the bank desires you in there at all costs. Essentially however it's not the bank's call if the trustee establishes that there is ample 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 put down the value of your house and the level you owe on the house. A tip if you are attempting to work out the value of your house: use a registered valuer as this will give you peace of mind, don't use your neighbours' gut feel recommendations or a real estate agents advice to get to this figure. When you get a valuer out to your property, make sure you tell the valuer to value the property for a quick sale, make sure 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 let them know you need to sell your home in the next 30 days you may control the result. The idea is that you want a real sell now figure.

There are two reasons this valuation system is critical to you: one you will likely have peace of mind ascertaining the market value of your house, and then you can easily build your equity position. The second thing is, your property may be really worth so much more than you thought. Get some guidance before doing this. The number of times I've met with clients that have sold their family home of 20 years simply to find out I could of helped them keep it;

 unfortunately this happens all too often

When it concerns Bankruptcy and houses, another main consideration is ownership, often houses are bought in joint names. In other words 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 involves Bankruptcy, this is just one of possibly numerous scenarios that are likely when it relates to the family home. Bear in mind the non-bankrupt party can buy the bankrupt's portion of the property in bankruptcy also. I have to repeat this but get some assistance on this area of Bankruptcy because it is very tricky and every single case is different.

If you wish 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 Melbourne on 1300 818 575, or visit our website: www.freshstartsolutions.com.au/bankruptcy-Melbourne

Bankruptcy in Melbourne - Who do I talk to?

Should I talk with my accountant about Bankruptcy?

The answer seems obvious doesn't it: if anyone knows your financial situation well in Melbourne, 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 expertise lie in helping you save you money at tax time, reducing your tax liability and lodging your BAS.

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

Should I consult with my Solicitor about Bankruptcy?

No! You can speak with your solicitor in Melbourne but more than likely it won't do you much good. Solicitors are definitely good at doing 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 concerns Bankruptcy, the specialists in Melbourne generally have either a legal or accounting experience, and the main reason for that is simply that you can't start in the post graduate study to become a qualified insolvency practitioner until you have a law or accounting degree.

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

Should I talk to a financial counsellor about Bankruptcy?

Yes! There are a lot of financial counselling services to aid you with this, they have no hidden agendas and they're a great option for helping you analyze your circumstance when it comes to Bankruptcy. If you find yourself stressing constantly, not sleeping, not eating or over-eating and thinking of money pressures regularly, then get some help.

There are also charities around Melbourne 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 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 points to ask about Bankruptcy, then feel free to get in touch with Fresh Start Solutions Melbourne on 1300 818 575, or visit our website: www.freshstartsolutions.com.au/bankruptcy-Melbourne

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

When people in Melbourne come to me planning to talk about Bankruptcy, they are always filled with questions. The internet has lots of information, but far too much of it is confusing or contradicts itself, so I make it my mission to try and make it more clear. One of the very most popular issues is 'Will I lose my business if I declare bankruptcy?' The short answer is no. If you are a manager of a business any shape or size you can keep your business if you want to. In Melbourne, businesses that eventually become insolvent have a few options like liquidation, voluntary administration and so on. It's people who go bankrupt not businesses.

Bankruptcy is a complicated area so get some expert 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 goes bankrupt. There are several important implications for directors of companies when it pertains to Bankruptcy in Melbourne: 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 once you're bankrupt.

A limitation 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 will need to reveal as an aspect of that but in essence you can still run your company. For some business owners, bankruptcy impacts their ability to run the business because of the licensing issues. For instance, 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 concerns licenses and Bankruptcy in Melbourne.

Having said that if your business is not impacted directly by such issues, then you'll have 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 company, then go bankrupt and after that open the doors the next day like absolutely nothing 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 matter of consulting with the right people about Bankruptcy. In this circumstance you may think you need a liquidator for your business, and you might be right, but bear in mind that every liquidator is distinct and have their own motives. Liquidators earn money from your liquidation - heaps of money - so exactly what advice do you think you will get?

When it comes to Bankruptcy, I believe that giving generic advice in this area is possibly perilous as it can have very major implications for directors and business owners. This is considering that it is one of those cases where what the right advice for one business owner is the inappropriate advice for the other. There are some principles however, that you may benefit from. There is no restriction to the size of the business you run while you are bankrupt. You can employ staff. You can constantly deal with your vendors 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 uneasy 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, precisely where to turn and what questions to ask about Bankruptcy, then feel free to call Fresh Start Solutions Melbourne on 1300 818 575, or visit our website: www.freshstartsolutions.com.au/bankruptcy-Melbourne

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

When it comes to Bankruptcy Melbourne, often people aren't aware that there are both voluntary, and involuntary bankruptcy - both have unique methods and rules.

Involuntary bankruptcy takes place when someone you owe money to applies to the court to declare you bankrupt. Generally when you get one of those notices, you have normally 21 days to pay all the debt. If you do not, then the creditor returns 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 and then you are bankrupt.

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

However, when it comes to Bankruptcy for this, the stress, torment and fear that accompanies this process is incredible. If you think you are in all likelihood to be made bankrupt by someone, get some guidance and act on that advice. Generally I've found it's always far better to know what you can and can't do before you have someone bankrupt you. Once you are bankrupt, it's generally far too late.

Voluntary Bankruptcy

Nevertheless, when it comes to Bankruptcy, sometimes there are times that it is the most ideal option. So you may want to ask yourself, 'when should I consider voluntary Bankruptcy?'.

This question is not the very same for every person of course, but commonly I find that one way you could work it out is to figure out just 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 really help you make that decision, and help you to understand Bankruptcy.

Once, I had an 80 year old pensioner, who spoke 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 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 telephone 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 truly damaged for that period of time - and all of this will affect how you have to approach Bankruptcy.

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

So if your credit rating is a big issue 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 pay back the money and still have it on your file for 7 years.

Bankruptcy

I have mentioned 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 specific country the provisions are very generous: you can go bankrupt owing millions of dollars and after 3 years it's all finished with no strings attached. Compared with countries like the United States, our bankruptcy laws are quite generous.

I don't pretend to know why that is but a few hundred years ago debtors went to prison. These days 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 costs the taxpayer anyway.

Bankruptcy wipes all of your debts including ATO debts with the exception of 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 a lot more that can be said about 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 options when it relates to Bankruptcy in Melbourne, so do some study, and Good luck!

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