If you become bankrupt, your bankruptcy trustee will be able to sell some of your assets. But there are various assets which are protected and which your trustee cannot sell.
So, what assets can and can’t be sold? Below we set out some of the most common assets which bankrupts may own, or become entitled to.
Cash at bank
Your bankruptcy trustee will probably let you retain a small amount of cash at your bank to meet your living expenses, possibly in the range of $1,000 to $3,000. However, if you have more than this in your bank account you will probably have to pay any surplus to your trustee. If funds are held in a joint bank account, only your share of the funds will be available to your trustee.
If you own an interest in real property, then your bankruptcy trustee can sell it. This includes selling a partial share of a property. If you jointly own a property with another person then one option may be for that person to purchase the equity in the property for fair value (after taking into account any mortgages) from you before bankruptcy or from your bankruptcy trustee.
You can keep a motor vehicle, you primarily use for transport, as long as it is valued under the relevant threshold. If your motor vehicle is financed, then the relevant threshold takes into account only any equity in the vehicle.
Superannuation is generally not able to be accessed by your bankruptcy trustee. However, if you draw down from your super fund before bankruptcy then any funds drawn which you still hold will go to your trustee.
If you take a lump sum payment(s) of superannuation after bankruptcy, you can retain it. Lump sum payments do not count as after-bankruptcy income, however, if you receive a pension or annuity from your super fund, this will likely be income and subject to the rules below.
Household furniture and belongings
You will be able to keep your household furniture and belongings as long as they have a reasonable value.
Tools of trade
In bankruptcy tools of trade refers to tools and equipment you own and use to earn a living. You can keep tools of trade if they are valued below a set amount.
Assets acquired after bankruptcy
Some assets which you acquire while you are bankrupt can be collected and realised by your bankruptcy trustee. This can commonly include gifts or winnings, or an inheritance received or to which you become entitled to.
In bankruptcy your income is not automatically paid to your bankruptcy trustee. However, if your after tax income exceeds the relevant threshold you will have to pay fifty percent of your after tax income over the threshold to your bankruptcy trustee. Commonly your bankruptcy trustee will set up a payment plan with you, so you will have to pay weekly, fortnightly or monthly amounts.
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