Can I still earn an income whilst being bankrupt?
Absolutely yes! While there are certain stipulations, you are free to earn as much as you like. In fact, this will probably help pay off your debts as well.
The Bankruptcy Act dictates that if you earn above a certain amount, then you can afford to contribute some of your earnings towards your bankrupt estate.
These amounts are indexed, which means that they increase every year. Your income over this threshold limit can be varied by factors such as dependants, child support payments, fringe benefits, income tax payable, and salary packaging.
When people first speak to us, many seem to think that they can only earn up to a certain amount of money before everything else is “taken” in bankruptcy. This is simply NOT true.
Here’s what really happens: if you earn over a certain amount (it is called the Base Income Threshold or Actual Income Threshold), then you might have to pay half of your net (after-tax) income over this amount. Half – not all.
The income threshold that applies to you will come down to the number of dependants who you support.
Remember the intent of bankruptcy is not to remove your ability to earn a living to support yourself and your loved ones. It is to help you clear your debts and get back on track with your finances.