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Employment and Income in Bankruptcy

Employment and Income in Bankruptcy

Author: Admin/Saturday, April 18, 2015/Categories: Blog

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When you become bankrupt you become legally released from almost all of your debts but, both during and after your bankruptcy, you’ll have certain obligations and face certain restrictions. It’s a large and complex legal area and in this post we are focusing solely on how bankruptcy imposes restrictions on your employment and income.

 

Employment in bankruptcy

 

The Bankruptcy Act itself doesn’t impose specific restrictions on employment and earning income during bankruptcy – you can still hold your job, apply for jobs and earn income. However, there may be industry-specific authorities that impose their own restrictions, which are not controlled by the Act. Some common examples of professions where this occurs include trades such as builders and plumbers; professional services such as real estate agents, accountants and solicitors; and public servants. Even if a profession imposes its own restrictions it doesn’t necessarily mean a person who is bankrupt cannot work in that profession, however anyone considering bankruptcy should review relevant codes and confirm directly with relevant organisations.

 

There are other important points about employment in bankruptcy. Employers are not generally notified and there is no obligation under the Act to disclose bankruptcy when applying for a job either, although prospective employers may always ask for this information. And where employment is terminated during bankruptcy, any lump sum termination payment will most likely be considered as income – and therefore be subject to the rules outlined below.

 

Income in bankruptcy

 

When you become bankrupt, a trustee is appointed to administer your bankruptcy. It is important you comply with your trustee’s requests for information as there are consequences for non-compliance.

 

Bankrupts are usually required to make contributions to their trustee where their after tax income exceeds a statutory prescribed limit during the period of bankruptcy, which is usually three years. The trustee will calculate the amount payable for each year of bankruptcy and will issue a notice of assessment that will include a consideration of wages and salary, tax refunds, taxable fringe benefits, salary sacrifice arrangements, superannuation receipts, business profits, loans from associated entities and any income earned overseas. The assessment will also take account of factors such as income tax payable, hardship claims, child support payments and income tax refunds.

 

The contributions required are influenced by the number of dependents that reside with the bankrupt, as outlined in the following table:

 

Gross annual income

Number of dependants

(estimated contribution payable as at September 2014)

0

1

2

3

4

5

$68,439.02

$0

$0

$0

$0

$0

$0

$70,000

$511.25

$0

$0

$0

$0

$0

$80,000

$3,786.25

$0

$0

$0

$0

$0

$90,000

$6,836.25

$2,107.34

$0

$0

$0

$0

$100,000

$9,886.25

$5,157.34

$2,792.89

$1,479.31

$953.87

$428.44

$110,000

$12,936.25

$8,207.34

$5,842.89

$4,259.31

$4,003.87

$3,478.44

$120,000

$15,986.25

$11,257.34

$8,892.89

$7,579.31

$7,053.87

$6,258.44

 

 

Need to know more about employment and income in Bankruptcy?

 

Your trustee will be able to provide further details regarding how bankruptcy may affect your income and employment based on your individual circumstances. But before you even get to that stage, you need personal and professional advice if you are considering bankruptcy. It’s a complex area impacted by multiple aspects of law but we’ll make sure you get tailored advice relevant to your situation.

 

Disclaimer: This information is generic in nature and provided on a discretionary basis only. You must always seek professional advice regarding its applicability to your own circumstance.

 

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