1 index 1. How this memorandum can help you 3 2. The Effect of Bankruptcy and Your Rights & Responsibilities 3 3. Trustees’ Duties and Powers 6 4. Statement of Affairs 6 5. Dealing with your Creditors 7 6. Income Contributions 9 7. Passport & Overseas Travel 10 8. Getting out of Bankruptcy 11 9. Objection to the discharge of your Bankruptcy 12 10. Other Items to consider 13 11. Further Information 15 12. Terms & Definitions 16 Schedule of Indexed Prescribed Amounts 22 Books and Records required by Trustees 23 2 bankruptcy memorandum 1. How this Memorandum can help you The purpose of this memorandum is to provide an overview of the bankruptcy processes in Australia, and some of the issues commonly encountered during bankruptcy. It contains a glossary of terms and a schedule showing the latest prescribed amounts (thresholds). For more detailed information, please refer to our website www.svpartners.com.au 2. The Effect of Bankruptcy and your Rights & Responsibilities Effect of Bankruptcy Bankruptcy may affect you in a number of ways, including, but not limited to, the following: • All of your divisible assets come under our control. We are entitled to recover and realise these assets. You are not to deal with your divisible assets, without our written permission. If you obtain or are given anything of value from prior to your date of discharge you should notify your Trustees immediately. • Not all assets become available to the Trustee for the benefit of your creditors. Certain assets are exempt and cannot be dealt with by the Trustees. Some of these exemptions include: Section 116(2)(b) Necessary household property and effects; Section 116(2)(c) Tools of trade to the value of $3,700; Section 116(2)(ca) Property used primarily as a means of transport (e.g. motor vehicles, motor cycles, etc) to the value of $7,600; Section 116(2)(d) A regulated superannuation fund or an approved deposit fund or policies of life assurance or endowment assurance in respect of the life of the bankrupt or the bankrupt spouse. • If you own any real estate, your Trustee has an obligation to sell your interest in that property. If you jointly own the property with other people, then the Trustee will seek the co-operation of the co-owner to do so. Whilst you continue to live at the property you should continue paying any mortgage instalments due, rates payments and ensure that the property is ensured and maintained in good order. You should send copies of the most recent mortgage statements and rates notices to your Trustees as soon as possible; 3 bankruptcy memorandum • Your unsecured creditors are no longer able to pursue you for outstanding debts or enforce any remedies against you or your property, unless the permission of the Court is obtained. You may direct them to your Trustee; • Your bankruptcy details are available to the public via a Government database known as the National Personal Insolvency Index (“NPII”) and usually on databases of credit reference agencies. Access to the Government database can be obtained by contacting AFSA or information brokers. Details of your name, address, date of birth, occupation and the number of the bankruptcy administration will remain on the NPII forever; • Bankruptcy usually lasts for 3 years (except where the bankruptcy is annulled). The bankruptcy takes effect immediately; however the 3 year period begins from when a Statement of Affairs is filed. Therefore, it is important that if you have not filed a Statement of Affairs, then you should do so as soon as possible, as this will determine when you are due to be discharged from bankruptcy. If you do not file a Statement of Affairs, the bankruptcy will continue indefinitely. 4 bankruptcy memorandum Responsibilities as a Bankrupt In addition to the above, the Bankruptcy Act provides that you must: Complete and file with the Official Receiver (AFSA) a Statement of Affairs, providing details of your financial position (assets and liabilities) and some personal details. Once completed, you can lodge this with your SV office, we can file this with AFSA for you ; Provide details of your income to us and if your income exceeds the relevant threshold prescribed by the Act, pay income contributions to your estate; Provide us with your passport. If you wish to travel overseas, you must provide us with details of the proposed trip and obtain our written consent to travel. Disclose to us all assets and liabilities and, as soon as practicable, including any ‘after acquired’ divisible property; Not obtain credit exceeding $5,496 (CPI adjusted) without disclosing the bankruptcy to the credit provider. You are still permitted to obtain credit whilst bankrupt, however, if the value of credit exceeds $5,496 you must inform the person you are dealing with that you are an undischarged bankrupt; Not trade under a business name (other than in your own name) without disclosing to every person with whom you deal that you are an undischarged bankrupt, irrespective of the amount of credit involved; Advise us of your address and daytime telephone number. You are required to notify your Trustee of all changes of name and changes of address; Not to take part in the management of a corporation without the leave of the Court. If you are a director of a company you should resign immediately and notify the Australian Securities & Investments Commission; Ensure that you provide information about your affairs to the Trustees when requested and aid in the utmost in the administration of your bankrupt estate. If you are unsure of your responsibilities, in the first instance you can seek further information from our website at www.svpartners.com.au. If you wish to discuss your responsibilities with one of our staff, please contact the office nearest you. All the contact details can be found at the end of this document or on our website. 5 bankruptcy memorandum 3. Trustees’ Duties and Powers We are independent parties appointed to administer your bankrupt estate. The role of a bankruptcy Trustee is to investigate your financial affairs and where possible, recover funds to pay a dividend to your creditors. We will be required to perform a number of functions as Trustees whilst administering your bankrupt estate – the most common of these are the following: 1. Notifying your creditors of the bankruptcy; 2. Taking steps to sell your property for the benefit of the estate – we are empowered to take possession of and sell your divisible property; 3. Determining whether you have made a transfer of property that is void against us as Trustees – we have powers to recover transactions that are preferential or void against us as Trustees; 4. Investigate your conduct and examinable affairs (extending to associated companies, trusts, partnerships and natural persons such as professional advisors and relatives) and obtain books and records relating to your affairs, including from you, your solicitor, accountant and any associated entities; 5. Assessing whether you are liable to pay income contributions to your bankrupt estate based on the level of your income; 6. Considering whether you have committed any offences under the Act; and 7. Administering the estate as efficiently as possible. 4. Statement of Affairs Under the Act, you are required to complete and lodge a completed Statement of Affairs. The Statement of Affairs is an important document, providing details of your asset and liability position, your income and some personal details. Your bankruptcy will last from the date you were declared bankrupt until three years from when your Statement of Affairs is filed. Therefore it is in your best interest that you provide your completed Statement of Affairs to our office as soon as possible. In addition, there are a number of penalties under the Act for failing to file a Statement of Affairs. If you have not already lodged your Statement of Affairs, please complete both forms and return one form (an original) to our office. We will lodge it on your behalf with AFSA (the Federal Government body overseeing all personal insolvencies). 6 bankruptcy memorandum 5. Dealing with your Creditors You are required to provide details of your creditors in your Statement of Affairs. Your Trustees will contact your creditors and advise them of the bankruptcy. 5.1 Dealing with Unsecured Creditors An unsecured creditor is a creditor who does not have a hold over the chattels / assets / property purchased with the credit afforded to you. As mentioned previously, one of the major effects of bankruptcy is that unsecured creditors cannot take further action to pursue you. Unsecured creditors are prevented from enforcing legal remedies (for example commence legal proceedings against you or issue a garnishee) against you or your property (except with leave of the Court). If unsecured creditors attempt to recover money from you, you should advise them of the bankruptcy and provide to them the contact details of your Trustee. If you receive physical harassment from creditors, you should contact the police. 5.2 Debts not dealt with under Bankruptcy Although for the most part, unsecured creditors are prevented from taking further action to pursue you, there are very important exceptions that are not dealt with under Bankruptcy: • Fines imposed by a Court for breaches of the law; • Debts arising from fraud or fraudulent breach of trust; • Maintenance payments; • Proceeds of Crime Orders • Debts owed to Centrelink; and • HELP debts. The effect of this is that these debts remain with you even after the date of your bankruptcy. You should still however advise your Trustee of the amount of these debts in your Statement of Affairs. 5.3 Secured Creditors Those creditors who hold security over your property (such as mortgages or bills of sale) are entitled to sell the goods in order to recover the amounts owing.