Employment & Self-Employment
- How does bankruptcy affect my employment?
- I have a job. Can I still file for bankruptcy?
- How much of my income do I have to pay the trustee for the benefit of my creditors?
- Will my employer be informed of my bankruptcy?
- What if I leave my employment during bankruptcy?
- Can I remain self employed if I file for bankruptcy?
- What happens to my ABN or can I apply for ABN now that I am bankrupt?
How does bankruptcy affect my employment?
Bankruptcy will normally not prevent you from working. Please note, there are certain trades or professions where there may be restrictions imposed by professional associations or licensing authorities. You should contact your professional association or licensing authority to confirm whether there is any effect on your membership or ability to practice a particular trade.
I have a job. Can I still file for bankruptcy?
Yes you can. The majority of people who file for bankruptcy are employed.
How much of my income do I have to pay the trustee for the benefit of my creditors?
Most people do not have to contribute anything. Ultimately it depends on how much you earn and how many dependents you have.
Currently, a person with no dependents can earn upto $1,089.90 per week after tax without being required to make contributions to the trustee. This threshold limit is considered a protected amount. The protected amount is higher if you have dependents.
Your trustee will request 50% off what you earn above the protected amount as contributions.
If you earn over the threshold and you fail to make your required contributions - they may be directly debited from your income.
Your "income" is broadly defined as your wages and any other benefit. Other factors such as income tax, maintenance payable and the number of dependents you have are also taken into consideration.
For detailed information about income contributions, view the government's PDF on this subject.
Will my employer be informed of my bankruptcy?
This is unlikely. Your employer would only be informed in very specific (and rare) circumstances (e.g. you fail to make required contributions and your employer is issued with a notice to forward payments directly from your wages).
It is an offence for an employer to dismiss a bankruptee because the trustee has issued the employer with a notice to forward payments from the bankrupt's wages.
What if I leave my employment during bankruptcy?
If, during the term of your bankruptcy, your employment is terminated - any lump sum termination payments you receive will be claimed by the trustee.
Can I remain self employed if I apply for bankruptcy?
Whilst you are bankrupt you cannot be a company director or secretary for the term of the bankruptcy without the permission of the court.
Even though you can't be a company director during bankruptcy you are still permitted to operate as a Sole Trader or within a Partnership which comes with a personal ABN. However, there are some restrictions.
The government requires that you trade in your own name if you wish to remain self-employed during the term of your bankruptcy. If you trade in your own name, you are not required to inform anyone that you do business with that you are bankrupt, unless you are seeking credit from them of more than $5,703.00.
If you already have an existing sole trader ABN then you may carry on using that. If you use a trading name or business name that is not your own name, bankruptcy law places you under an obligation to tell all the people that you do business with that you are currently bankrupt. People generally prefer to keep their bankruptcy private and most people can trade in their own name without many problems.
As a practical example of trading under your own name while bankrupt - on your business card you could place your name on the top line, i.e John Q. Citizen - then on the second line describe what you do, i.e: Brisbane Care Detailing. You are now legally trading in your own name and that's an advantage because people now know who they are dealing with and you are also describing what your business does.
What happens to my ABN or can I apply for ABN now that I am bankrupt?
If you already have an existing ABN when you become bankrupt, your trustee will advise the Deputy Commissioner of Taxation of your bankruptcy. The Tax Office will take note of your bankruptcy against the ABN. If you want to continue using the ABN you need to contact the Tax Office to have your ABN reactivated. You will still be responsible for lodging your BAS Statements. After becoming bankrupt there are no restrictions on obtaining an ABN other then you must trade in your own name.
Note: These F.A.Q's are for information only and should not be relied on as legal or financial advice. Your personal circumstances are not considered in any of the content above.