• A trustee will be appointed to oversee the bankrupt’s financial affairs;
• An investigation will be implemented to check for improper transfer or disposition of property. An investigation can go back over the previous 5 years.
• Any Passport must be handed over to the Trustee;
• Income will be scrutinized by the Trustee and if earnings exceed certain thresholds then the Trustee will require contributions from the bankrupt to meet both the trustee’s expenses and payments to creditors.
• It is prohibited for a bankrupt to:
  • Be a director of a company;
  • Manage a business, other than in his or her own name;
  • Hold public office;
  • Hold an occupational licence (depending on rules & policies of the regulator);
  • Keep or maintain assets in excess of those stipulated in Bankruptcy Regulations;
  • Transact monetary instruments (cheques) over a certain limit without advising the recipient that the bankrupt is an undischarged bankrupt.
• A bankrupt will remain an undischarged bankrupt for a period of no less than three (3) years and in certain circumstances this period can be extended.
• A bankrupt’s credit file will be annotated for a period of not less than seven (7) years.
• It will be extremely difficult to obtain any form of credit;
• Bonds may be required to be paid to utility services in excess of what otherwise may be sought;
• A bankrupt’s job may be at stake and moreso if that job entails handling cash.
• If you are given or bequeathed property of any nature after the commencement of bankruptcy it will automatically vest in the trustee. This is known as after-acquired property.

Effects on family

• A severe lifestyle change is inevitable.
• Children and juniors may suffer from an inability to share outings with their friends and school;
• Children and juniors may have to change schools;
• Gifts, a usual part of family life, will diminish for lack of available funds;
• Spouse’s will suffer from an inability to maintain the household to the usual standard of meals, furnishings, entertainment, clothing etc.
• Neighbours and friends may become aware of the bankruptcy and adopt attitude changes toward spouse’s and children.

Effects on others

• Merchants accustomed to doing business with a bankrupt lose a client and attending income from those business dealings;
• Employees of the bankrupt will inevitably lose their job and will be placed in a position of unemployment by no fault of their own culminating in them not being able to pay their obligations;
• The bankrupt may be left in a position of having to rely upon social service payments from the federal government thereby becoming a recipient of benefits, perhaps on a long term basis.
• Creditors’ returns are either severely diminished or written off totally. This ultimately leads to tighter lending practices and higher interest rates.

In general, a stigma will attach borne from the perception in the community that bankruptcy is an act of dishonesty or at best financial failure due to mismanagement.

Nowhere in insolvency law, is there a mention of a bankrupt’s rights!

Everywhere in insolvency law there is reference to the rights and interests of creditors!

In concluding this part on bankruptcy issues it should be clearly and categorically stated that many bankruptcies are brought about by events totally beyond the control of the bankrupt.

Many bankruptcies are not the direct fault of the bankrupt and have occurred due to a cataclysmic event in their lives. Serious illness, unexpected loss of employment, bereavement; or relationship breakdown.

In fairness to these individuals they could hardly be tainted as dishonest or lacking in financial skills.

There is a purpose to bankruptcy. It is intended to teach those who enter this state to be more financially aware, learn by their mistakes; accept the consequences of their actions – with a view to returning the bankrupt to society a better informed and more reliable member of the community.

The tenet in insolvency law is basically “Don’t borrow what you cannot pay back.”

Information concerning bankruptcy and other administrations may be obtained from www.itsa.gov.au