Bankruptcy is a scary word, but it also brings a feeling of helplessness when you see your parents struggling in retirement. If they are living beyond their means, then it is possible that their creditors will start to circle looking for repayment. Bankruptcy while working is hard enough, but how does bankruptcy affect those who are retired? There are two things you need to know so you can support your parents during their time of need.
The Family Home
Generally, bankruptcy will not strike both of your parents at the same time, as the majority of the bills are generally held in the name of either your dad or your mum. Therefore, only one of them is like to have to declare bankruptcy if the bills cannot be paid.
The family home, however, is likely owned in joint names. Even if the mortgage is paid up to date on the home, the bankruptcy trustee does have the right to sell the property if there is enough equity in it to pay back the creditors. However, if one of your parents is not bankrupt, they do have the option to buy out their bankrupt spouse and transfer the property into their name only. This purchase has to be done at current market value, and the transaction will be carefully scrutinised. If you have some spare money available for investing, you may be able to help keep the family home for them.
The good news is that your parent's superannuation fund is exempt from being taken during the bankruptcy process unless there is evidence they placed cash into the fund as a way to hide it from their creditors.
The bankruptcy trustee will have a look at the recent transactions that went into their superannuation fund, and they do have the power to take out money that was deposited in the previous six months if they suspect it was only put there as a hiding place. The fact that the superannuation fund is safe from creditors (provided all deposits were made above-board) means your parents will still have some income on which to live.
Parents do not like to admit to their kids they need help, but if you suspect bankruptcy could be imminent based on comments made by them, encourage them to seek the advice of a bankruptcy lawyer. With the most current information at hand, they can then work out a plan which may save them from having to face this situation during the later years of their life.Share