It can be a tough time deciding whether or not to file for bankruptcy. You may be worried about the possible serious negative consequences of bankruptcy. Some of the common advice from friends and family, or information found on the internet might actually be incorrect. To ensure you are equipped with the correct information to help you make the right choice, we have debunked the top 4 common bankruptcy myths below:
- You cannot run a business whilst bankrupt
This is false. Although you cannot be a company director for a period of time that usually lasts for three years, you can still run a business as sole trader, employ staff and generate income. There will be certain restrictions placed on the business including that the business must be in your own name and that if you apply for credit over $5,882 you must disclose you are bankrupt.
- You will lose everything in bankruptcy
This is false. You are likely to lose property and significant assets to help you pay off your debts. However, most people will be entitled to most of their assets such as:
- Normal household items;
- Reasonable amount of cash to cover living expenses;
- Motor vehicles to the value of $8,000
- Superannuation, unless irregular contributions were made before bankruptcy.
- You cannot travel while bankrupt
This is false. Some people believe they will be banned from travelling or automatically blacklisted when they declare bankruptcy. However reality is that a bankruptcy trustee will generally allow you to travel overseas as long you are complying with your duties to provide information and make required payments. Prior to travel you will be required to gain written approval from your bankruptcy trustee and disclosure certain information about your travel.
- If you cannot pay off your debts you will go bankrupt
This is false. Whilst bankruptcy may ultimately be the best option, especially for those with limited assets and an earning below the income threshold. There are also various options available if you want to avoid bankruptcy, such as:
- Informal arrangements with your creditors
- Entering a debt agreement
- Personal insolvency agreement
For more information, we offer a FREE initial consultation so that you can get unbiased, expert advice on how a bankruptcy can be best for you. Call the CRS Insolvency Services hotline at 1800 210 073.