Choosing bankruptcy is not an easy decision, and the reality of it can be frightening. It is, however, sometimes the most positive way forward. If you have declared personal bankruptcy or are about to face it, there are some restrictions on what you can do and receive during this period. The question “What happens if I receive money during personal bankruptcy?” is one that bankruptcy clients frequently ask.
When you declare personal bankruptcy, you have obligations and restrictions on how you handle assets, especially when you receive assets. If you receive assets or money while in personal bankruptcy, you must notify the Bankruptcy Trustee. Aside from any modest amout left in your savings account and money earned as part of a wage, you may occasionally receive lump-sum payments. Here’s how personal bankruptcy will affect each of those payments, find out more.
“I’m About To Receive An Inheritance…”
The assumption here is that at the time of personal bankruptcy, the property and/or monetary inheritance is in your name. If you receive the inheritance while you are in bankruptcy(typically three years or until your debts are paid), the inheritance must be paid to the Trustee for the benefit of the creditors. You must notify your Trustee as soon as you receive the inheritance.
“I Am Receiving A Redundancy Payment…”
If you receive a redundancy payment before personal bankruptcy, your redundancy payment will be considered an asset that must be paid to the Trustee. If you receive a redundancy payment during personal bankruptcy period, it is included in your taxable income. Your assessable income is generally capped at an indexed amount, and if you lose your job, you must pay a portion to the Trustee.
“I Have Won/Been Gifted Money…”
Any monetary winnings will be claimed by your Trustee for the benefit of your creditors. You must notify your Trustee of your win upon you receive the prize.
“I Would Like To Receive My Super…”
Super is one of the few areas of receiving money that your Trustee cannot claim, whether you claimed it before or after declaring personal bankruptcy. If you want to access your super early, you should consult with a financial professional to ensure you don’t face any additional penalties or strain.
If you have declared personal bankruptcy and are due to receive a financial injection, you should always contact your Trustee as soon as possible. They will be able to definitively inform you of your legal rights and responsibilities with regard to the money.
While having to pay money to the bankrupt estate can be disheartening, there is a silver lining. If the money received during personal bankruptcy exceeds the Trustee’s costs and the amount owed to creditors, it may be enough to pay off your bankruptcy completely. As a result, your bankruptcy period may end sooner. That is a huge accomplishment!
Experts in restructuring, turnaround, and insolvency, Shaw Gidley offers no-cost initial advice on these topics. Please call (02) 4908 4444 or (02) 6580 0400 to reach our offices.