When you fall upon hard times financially, a lot can be at risk. Entering personal bankruptcy means giving up control of your funds and your assets, so creditors can be appeased and debts can be paid. Your name goes on the National Personal Insolvency Index, and the trustee in control of your affairs will sell off your assets to cover your debt to the best of their ability.

You are usually bankrupt for three years (sometimes longer), and this remains on your credit report for five years or more. It is a very serious situation – but what is the most important thing you could lose?

The family home is the biggest asset that most Australians have.The family home is the biggest asset that most Australians have.

Protecting your valuables

As the Australian Financial Security Authority states, in the context of personal insolvency, assets are "anything of value you own at the time of becoming bankrupt". This can include super funds, bank accounts, insurance policies that have been taken out for you, even your vehicles. 

When you enter personal insolvency, the trustee takes full control of your assets.

However, the most important thing that you could lose in this situation is the family home. The traditional Australian dream is home ownership, and real estate will normally be the single greatest asset that people have. According to CoreLogic RP Data information, the median value of real estate across Sydney, Melbourne, Perth, Adelaide and Brisbane / Gold Coast is more than $750,000. As property values continue to rise, the importance and power of this asset also goes up.

When you enter bankruptcy, the trustee takes full control of your assets, and you no longer have any rights or power to choose how they are dealt with. Clearly, protecting your most valuable possessions is of paramount importance – but how do you do it? With the right debt assistance

Ask the experts

Once you've entered bankruptcy, it is probably going to be too late to protect the family home – although talking to Cactus Consulting about personal insolvency agreements is one way to stem the tide and perhaps prevent bankruptcy.

In many cases, simply being prepared and well-structured with your finances is the key. Understanding your cash flow and debts, as well as how things could go wrong, is essential. The team here at Cactus is well-versed in pre-insolvency advice, and can help you work out what the key threats to your finances are, and how restructuring or financial sensibility can protect assets like the family home.

Posted on 09-06-16 in Debt management, Personal finance insights and updates.