I’m Bankrupt! Will This Affect My Employment & Income?

 

So, you’ve become bankrupt, either by your own volition or that of a creditor, and now your assets are in the hands of the Trustee in Bankruptcy (‘the Trustee’), but what does this mean for your employment and income?

 

Bankruptcy & Employment

 

Although bankruptcy in itself does not stop you from working, it may (likely) have an impact on your income and employment opportunities.

The Australian Financial Security Authority will not inform your current employer that you are bankrupt.

However, this does not prevent current or potential employers from asking if you are bankrupt or conducting a National Personal Insolvency Index search.

The Bankruptcy legislation does not impose restrictions on employment.

However, particular industry associations and licensing authorities impose some restrictions that you ought to be aware of, such as:

  • You cannot manage a trust account (e.g., as a solicitor or accountant);
  • Some professional or licensing bodies impose restrictions on some trades and professions;
  • You cannot be a director of a company or manage a company without first obtaining permission from the court; and
  • There may be limitations to operating as a sole trader. For example, if your business name does not contain your full name, then you must inform people you do business with that you are bankrupt.

 

Bankruptcy & Your Income

 

Given the Trustee has control over your assets during the bankruptcy process, you must inform the Trustee of any changes to your income and/or employment such as changing jobs, receiving a higher or lower income, or that you’ve stopped working.

Although there is no limit to how much you can earn whilst you are bankrupt, if your after-tax income exceeds a prescribed amount, you may be required to make compulsory payments depending on your dependents.

The income contribution thresholds are updated twice a year on 20 March and 20 September and can be found on the Australian Financial Security Authority website.

Currently, the Base Income Threshold Amount with no dependents is $70,006.30 (after-tax). These contributions are used to assist in repaying your debt.

The Trustee will notify you when you are required to make payments.

There is also no limit to how much you can save during bankruptcy.

However, the funds in your account on the date of bankruptcy form part of the assets that are seized by the Trustee.

 

Income Contributions in Bankruptcy

 

A working bankrupt may be liable to make a contribution to their bankrupt estate from income earned during their bankruptcy.

It is equitable that some of the rewards from the bankrupt’s efforts during the bankruptcy period be used to satisfy their past debts and this has been legislated for in the Bankruptcy Act.

Generally, income has the same meaning as defined under Taxation Acts, but also includes other amounts that have not been earned from physical exertion or investments, and amounts that may not even be taxable income.

These other incomes include loans made to the bankrupt, items that fall under the Fringe Benefits Tax, annuities, pensions, and some social security or insurance payments.

 

Contact Us

 

If you require further information regarding the consequences of bankruptcy or guidance around the bankruptcy process, contact us at Bambrick Legal today. We offer a free, no-obligation 15-min consultation for all enquiries.

Read more about our Bankruptcy and Insolvency services here.

Related Blog – Bankruptcy & the Family Home

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