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Debunked: Navigating the Myth of Total Debt Relief


The belief that declaring bankruptcy is akin to setting a clean slate is a widespread misconception. In truth, while bankruptcy can significantly lighten the load of many unsecured debts, it doesn't completely lift all financial burdens. The reality in Australia is that certain debts anchor themselves firmly, resisting the tides of bankruptcy relief.


Secured Debts: Anchored Obligations

Secured debts, much like anchors to pivotal assets such as your home or car, remain steadfast. Should you falter in meeting these obligations, creditors retain the right to reclaim the tied assets to settle the debts. Bankruptcy does not sever these ties; secured creditors are still able to recover what is owed by repossessing the assets if payments are not made.


Child Support and Maintenance: Unwavering Commitments

Obligations such as child support and spousal maintenance are not dissolved by the waves of bankruptcy. These are prioritised debts, critical to the well-being of dependents, and must continue to be honoured. Both the Australian Financial Security Authority (AFSA) and Child Support Guide reinforce that these commitments withstand the storm of bankruptcy.


Court-Imposed Fines and Penalties: Resistant to Discharge

Fines and penalties levied by the courts—whether they be for traffic violations or other legal infractions—are not cleared through bankruptcy. These are debts that you are required to fulfill even after your discharge from bankruptcy proceedings, much like a compass continuing to point towards a moral and legal north.


HECS and HELP Debts: Enduring Educational Loans

Debts from the Higher Education Contribution Scheme (HECS) and the Higher Education Loan Program (HELP) do not evaporate with bankruptcy. These government loans remain with you, continuing to require repayment just as a captain remains responsible for their ship.


Debts Incurred After Bankruptcy: New Debts on the Horizon

Any obligations you undertake after declaring bankruptcy are yours to manage. Like navigating through uncharted waters, these new debts need careful handling, free from the protections of prior bankruptcy declarations.


Other Non-Dischargeable Debts: The Inescapable Depths

Certain debts, like those stemming from fraud or obligations to the Australian Taxation Office under pre-bankruptcy garnishee orders, also resist the erasing tide of bankruptcy. These remain with you, ensuring that some parts of your financial past continue to cast long shadows.


Navigating the Complex Seas of Bankruptcy

While bankruptcy can offer a reprieve from certain overwhelming debts, it's not a universal remedy. The decision to enter into bankruptcy should be made with a thorough understanding of which debts will be washed away and which will persist. Bankruptcy carries long-term implications for your credit landscape and can impact future employment and credit opportunities.


For those charting a course towards bankruptcy, seeking professional advice is crucial. Understanding the full implications of your decision and exploring all available options are essential steps. TTJ Advisory can help so feel free to reach out to us.

Factcheck

All my debts will be cleared.

Not all debts are cleared in bankruptcy. Certain types of debts, such as secured debts, child support, and fines imposed by a court, are not discharged by declaring bankruptcy.

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