Bankruptcy Consequences Explained
Bankruptcy Articles > Article: Bankruptcy Consequences ExplainedOnce the Debtor's Petition is accepted by the ITSA, the bankrupt party will have restrictions placed on their financial rights. The following consequences will apply:
1. The bankrupt party will remain bankrupt for a minimum period of 3 years. The trustee in charge of the bankruptcy can extend the bankrupt party's bankruptcy for up to five years. Potentially, the bankruptcy could last 7 years.
2. The bankrupt party's name will be accessible in public records (NPII) forever. They bankrupt party's information will also be available for 7 years in the commercial credit reference system.
3. The bankrupt party is required to notify creditors of their bankrupt status if the bankrupt party wants to apply for a line of credit where the amount exceeds the set limit. Failure to do so could result in criminal charges.
4. If a bankrupt party is going to purchase goods from a seller or trade services (exceeding the set limit,) they must notify the seller that they are bankrupt. Failure to do so could result in criminal charges.
4. If the bankrupt party changes any personal information, while bankrupt, they must inform their trustee immediately. Personal information includes: name, address, and income.
5. The bankrupt party is not allowed to be the manager of a company without the written permission of their trustee.
6. The bankrupt party is unable to hold specific public positions without the written permission of their trustee.
7. Any bankrupt party that works under a different name (alias) than their own name must inform anyone who works with them that they are bankrupt. This includes business partners and any other business that works with the bankrupt party's company. Failure to do so could result in criminal charges.
8. Everyday, household items will not be eligible for sale by the trustee. Any equipment used by the bankrupt party for work (that help them earn an income) cannot be sold either (up to a specific monetary limit). Other assets, including the party's home, will be forfeited to the trustee. The trustee can then determine if they would like to sell the items. The money from the items that are sold will go directly to creditors. The bankrupt party cannot conceal, remove, or dispose of any property that could be used to repay their debt. Doing so could result in criminal charges.
9. Bankrupt parties are not allowed to travel outside of the country without the written consent of their trustees. The trustee can ask you to surrender your passport if he or she feels you should not be allowed to travel abroad.
10. Bankrupt parties might find obtaining employment difficult. Companies that are seeking an employee who must handle money might reject the bankrupt party's application immediately.
11. If the bankrupt party's income increases during the bankruptcy, their Trustee can require them to 'contribute' some of their income. The contribution is redistributed to the creditors to which the bankrupt party owes money. If the bankrupt party does not cooperate and voluntarily contribute money, the trustee can force wage garnishment to ensure they are receiving the money.
Wage garnishment occurs when money is deducted from an employee's monetary compensation as a result of a court order. The money is taken directly from their paycheck before the paycheck is given to the employee.
12. Bankrupt parties might find they have a difficult time:
- Borrowing money
- Buying items using credit
- Opening new insurance policies
- Renewing existing insurance policies
13. Bankrupt parties might be required to put a down payment (bond) on certain accounts before they are allowed to open them. The companies that do this require bankrupt parties deposits as a security measure. These companies include:
- Rental properties
- Equipment for rent
- Electric companies
- Water companies
- Telephone companies
- Cellular phone companies
14. Trustees might take over the rights to a bankrupt party's bank account. The trustee will use the money in the account to pay creditors. If the trustee does not do this, bankrupt parties will still have a difficult time using their bank accounts. Some banks will restrict the usage of the account to ensure you do not overdraw from the account. Bankrupt parties attempting to open a new bank account will also find this task extremely difficult.
Please learn more about all of your options before you decide on a course of action. Bankruptcy should be considered a last resort. Bankruptcy is a serious matter and will affect the bankrupt party's life for at least 3 years.
