For professional women there are often multiple and complex reasons why debt may start to build up and there are also a lot of common myths about personal insolvency which I’d like to put to rest.
People I speak with are often worried they’ll never be able to borrow again, but in reality, this is often not the case.
Your ability to borrow in the future will depend on your circumstances,which can include how much you’re earning, your ability to pay back whatever it is you’re trying to borrow, your recent payment history and your savings. That last one is particularly important if you’re looking to apply for a home loan.
Yes, bankruptcy does come with a credit report listing, but that listing ordinarily lasts for 5 years (as with defaults and debt agreements) and then it will be removed. After the 5 years – your credit report will free of any information regarding the bankruptcy. In other words – standard lending criteria will apply.
Can I own a bank account?
Bank accounts (excluding overdraft accounts) are not a form of credit, so having one (or several) is typically not an issue when you become bankrupt. Mostpeopleneed access to Visa or MasterCard facilities throughout their bankruptcy, which can be organised via a Debit Card. Debit Cards are not the same as Credit Cards because they use the money in your bank account, not the lender’s money.
Most major banks and financial institutions can provide Debit Cards to customers with normal transactional bank accounts.
Can I rent a property?
Property rental is a common concern among people considering bankruptcy.
Based on our collective experience, and combined with the experience of our clients, we can say that while it may seem like a legitimate concern to have (and for some people it is), we rarely find that this concern ends up being warranted.
Every rental application is different. Some will ask if the individual is bankrupt, while others will focus solely on the ability to service the rental fees. Even if asked about the status of insolvency in the application stage – it doesn’t automatically mean that the rental application will be rejected.
There are close to 20,000 people filing for bankruptcy in Australia every year andmore than half of these people are renting. If more than 10,000 people were truly being rendered homeless due to their inability to rent a property during bankruptcy, we would be acutely aware of it by now.
Travel
Another common misconception is that you can’t travel or go on an overseas holiday while you’re bankrupt.
In reality, you can travel – as long as you obtain permission from your trustee.
When you request consent to travel overseas, your bankruptcy trustee will review your bankruptcy administration to determine whether you’re meeting your obligations under the Bankruptcy Act.
Here are some of the things your trustee will take into account when deciding whether to give you permission to leave the country:
- Have you provided all the information requested by your Trustee?
- Are there any outstanding matters that require your physical presence in Australia for their resolution?
- Have you been assessed as liable to make contributions from your income and, if so, are the payments up to date?
- Is there any reason to suspect that you might fail to return to Australia?
Obtaining permission is actually a lot simpler than it sounds but it will ultimately come down to the above points – i.e. whether or not you’re playing by the rules when bankrupt.
For most people, obtaining permissionisn’t a problem.
Another point worth mentioning is that some people think that you’re unable to have a passport or must surrender it to the bankruptcy trustee. While it’s true that a trustee can ask someone to surrender their passport, it’s completely discretionary but in our experience, rarely occurs for most people.
To find out about the effects of declaring bankruptcy on your income and employment status click here <link to Part I>, to find out common myths around bankruptcy click here <link to Part II>.
