It’s not an easy decision to take bankruptcy, and the reality of it can be daunting. Sometimes, though, it is the most positive way forward. If you have found yourself in bankruptcy, or about to face it, there are a few restrictions to what you can do, and receive, during this time. A question we get asked a lot by bankruptcy clients is, ‘What happens if I receive money during bankruptcy?’.
When you become bankrupt, you have obligations and restrictions on how you deal with assets, especially when you receive assets. If you receive assets or money during bankruptcy, you will have to let the Bankruptcy Trustee know. Outside of any modest amount left in your savings account and money you earn as part of a wage, there may be instances where you receive lump-sum payments. Here are how each of those payments will be affected by bankruptcy.
“I’m about to receive an inheritance…”
The assumption here is that the property and/or monetary inheritance is in your name at the time of bankruptcy. If you then receive the inheritance while in your bankruptcy period (typically three years, or until debts are paid), unfortunately, the inheritance will have to be paid to the Trustee, for the benefit of the creditors. You will need to inform your Trustee immediately upon receiving the inheritance.
“I am receiving a redundancy payment…”
If you receive a redundancy before bankruptcy, your redundancy payment will be an asset which is to be paid to the Trustee. If you receive the redundancy payment during your bankruptcy period, it becomes part of your assessable income. Your assessable income is generally capped at an indexed amount, and if your redundancy tips you over, you will need to pay a portion to the Trustee.
“I have won/been gifted money…”
Your Trustee will claim any monetary winnings at the benefit of your creditors. You will need to tell your Trustee about your win as soon as you receive the prize.
“I would like to receive my Super…”
Super is one of the only areas of receiving money that your Trustee cannot claim, whether you have claimed it during or after bankruptcy declaration. If you want to access your super early, it would be best to speak to a financial professional about your eligibility to ensure you don’t risk facing further penalties or strain.
If you have declared bankruptcy and are due to receive a financial injection, it is always the best idea to contact your Trustee immediately. They will be able to definitively inform you of your rights around the money and your legal responsibilities to it.
While it can be a little disheartening to have to pay money to the bankrupt estate, there is a positive. If the money received during bankruptcy is more than the Trustee’s costs, and the amount owed to creditors, it could pay out your bankruptcy in full. Which means your bankruptcy period could end earlier. That is a real win!
Shaw Gidley is here to help you make your bankruptcy experience as seamless as possible. Contact us today for any bankruptcy questions.