Unfortunately, there are some common misunderstandings about bankruptcy that may deter your clients who could benefit from it. These misunderstandings often come from well-meaning friends, family, or coworkers who might not have accurate information. We’ve identified eight of these misunderstandings, and we’ll begin to explain them below. Our goal is to provide you with the right information about bankruptcy so you can determine if it’s the best choice for your clients.
- Bankruptcy is difficult
While bankruptcy may appear to have many rules and seem somewhat confusing, it’s not so daunting that you should overlook the potential benefits it offers. With a skilled and experienced bankruptcy trustee on your side, you should feel at ease. The process is generally straightforward for most individuals. In fact, many of our clients have mentioned that they would have considered this option earlier had they known what the bankruptcy process entailed. - If I go bankrupt I will lose all my property and everything I have
This isn’t accurate. Thanks to various exemptions within bankruptcy laws, most individuals who go bankrupt can retain their vehicle (provided it falls within a certain equity threshold) and essential household belongings. It’s important to understand that bankruptcy laws are designed to help rather than inflict harm. They’re not intended to force your clients into a situation where they have to live on the streets.
- If I go bankrupt, I will never get credit again
This isn’t entirely accurate. If a bankrupt individual applies for credit over a set amount, he or she must inform the credit provider of their bankruptcy. Credit reporting agencies keep records of a bankruptcy for five (5) years from the date a person becomes bankrupt, or two (2) years from when the bankruptcy ends, whichever is later. It is up to credit providers whether they are willing to extend credit to bankrupts and discharged bankrupts. But it is possible to rebuild credit after going through bankruptcy. Typically, when someone is considering bankruptcy, their credit rating is already in poor shape. In many cases, filing for bankruptcy can offer your clients an opportunity to begin repairing their credit rating. The reason is straightforward: their previous debts have been addressed and resolved. With a clean slate and post-discharge, they can establish themselves as responsible users of credit once again. In fact, some major banks, including at least one of the big-4 banks, are willing to extend credit to discharged bankrupts, provided they meet the repayment capacity, and the bank was not a creditor in the bankruptcy. Many bankrupts have successfully gone on to purchase homes after rebuilding their credit.
- If I am married, my spouse must also go bankrupt
This isn’t true. It is entirely possible for one spouse to go bankrupt without the other. In fact, there are many cases where it makes more sense for only one spouse to do it. Sometimes, misplaced fears can lead a spouse to request that their husband or wife not go bankrupt. However, it’s essential to know that hundreds of individuals file for bankruptcy without involving their spouse in the process. There may be some implications for jointly owned assets, such as a house or a motor vehicle. Typically, the bankrupt spouse’s share of jointly owned assets becomes part of the bankrupt estate. In many instances, the non-bankrupt spouse has the option to purchase the bankrupt estate’s interest in the asset.
Talk with experienced Bankruptcy Trustee: For our valued referrers, it’s important to recognise that bankruptcy can be a lifeline for clients dealing with severe financial burdens. It’s a tool designed to help them regain control and work towards a more secure financial future. By referring clients to experienced insolvency professionals like BT Acumen, you are offering them a path to financial recovery and a fresh start, without passing judgment on their financial situation. To get the facts about bankruptcy and learn about your personal bankruptcy options, call BT Acumen on (03) 9999 7946 or 0431 313 055, or send us an email at info@btacumen.com.au. Stay tuned for our next instalment in this series, where we’ll unravel another six bankruptcy myths.
