In our ongoing mission to provide accurate bankruptcy information, we’re back to debunk another set of common bankruptcy myths. These misconceptions often deter individuals from exploring bankruptcy, even when it could provide them with much-needed relief. Our objective is to equip you with the right knowledge about bankruptcy, allowing you to make informed decisions toward the best financial solutions.
- There Is No Shame in Filing for Bankruptcy
The belief that filing for bankruptcy reflects poorly on a person is simply untrue. In reality, the majority of people who file for bankruptcy are hardworking individuals navigating severe financial challenges. Australia’s bankruptcy laws exist to provide relief and a pathway to a fresh start for those facing overwhelming financial difficulties. Financial hardships can affect anyone, regardless of their background or circumstances. Filing for bankruptcy is not a reflection of someone’s character or financial responsibility. On the contrary, it can be a courageous, responsible, and honest decision—one that prioritises securing a stable future for themselves and their family. Recognising the need for help and taking steps to address financial distress is an act of strength, not failure. Bankruptcy is more common than many realise, and it’s an essential tool designed to help individuals regain control and move forward with dignity.
- You can only go bankrupt once in a lifetime
Contrary to popular belief, bankruptcy isn’t a once-in-a-lifetime event. Circumstances can lead individuals to seek bankruptcy relief multiple times. Life can throw unexpected challenges our way, such as job loss, business failure, divorce, illness, unforeseen expenses, or financial setbacks. Unfortunately, these circumstances can arise more than once in a person’s lifetime.
- You can pick and choose which debts and property to list in your bankruptcy
This isn’t true either. It’s against the law to selectively choose which debts and property to include in a bankruptcy. When petitioning for bankruptcy, all property and debts must be listed and disclosed to your Bankruptcy Trustee. Some people may wish to exclude a debt because they want to continue making payments, e.g.: a car loan, and the vehicle is used as security for the loan. A person can continue making monthly payments as long as the secured creditor accepts them. However, it must still be disclosed during the bankruptcy process.
- Even if you go bankrupt, all creditors will still harass you and your family
This is not accurate. When your bankruptcy petition is accepted, the Australian Financial Security Authority (AFSA) immediately notifies creditors about the bankruptcy. However, secured creditors and unsecured creditors are treated differently in bankruptcy. Bankruptcy doesn’t prevent secured creditors from collecting payments and pursuing late payments. To stop these actions, the person can choose to surrender the secured assets to the creditor. The secured creditor may sell the asset and use the sale proceeds to pay off the secured debt. If there is an outstanding balance after the sale, it becomes an unsecured debt. At this point, the creditor is treated the same as other unsecured creditors in the bankruptcy. Unsecured creditors are prohibited from taking any action against the individual once they declare bankruptcy.
Talk with an Experienced Bankruptcy Trustee: It’s crucial to recognise bankruptcy as a potential lifeline for people burdened by severe financial difficulties. It’s a tool aimed at helping them regain control and embark on a path to a more stable financial future. By contacting an experienced understanding insolvency professional, like those at BT Acumen, you can have financial recovery without judgment. To gain in-depth knowledge about bankruptcy or explore personal insolvency options, please contact BT Acumen’s office on (03) 9999 7946 or 0431 313 055, or via email us at info@btacumen.com.au.
