Bankruptcy is never a pleasant prospect for anyone, and much less for those who have a Self-Managed Superannuation Fund. The reality, however, is that people who have invested into an SMSF have more complex issues when dealing with bankruptcy than others. Here are the top 3 reasons why:
1. You become disqualified
This is the main reason that so many people who invest into their SMSF have problems. What happens is either they become bankrupt or another member of the fund becomes bankrupt and then that person becomes “disqualified”. This means that the person who is facing bankruptcy can no longer hold control over the SMSF.
The two solutions are either to roll over the administration responsibilities to an RSE licensee or to rollover responsibilities to another member of the fund. Either way, this particular person will lose their administrative privileges and will be forced to fix their finances so that they are no longer facing bankruptcy within a 6 month time frame. The alternative is that this person must exit the fund altogether. The good news is that once this member has regained financial control, they may be reappointed as a member of the fund.
2. Your SMSF funds are protected
There is a silver lining in the upsetting prospect of bankruptcy when regarding your self-Managed Superannuation Fund. The funds that you have worked so hard to raise will be protected from creditors. There are, however, limitations to what this protection can provide. The first is that any funds that are contributed once you have entered this stage of financial endangerment can be taken back out and used to pay creditors. This would be done if it was deemed that the funds were contributed in order to keep from paying creditors.checkout latest details from this source.
The second limitation on the protection is that if you were to make a contribution that would be deemed out of the ordinary that these funds could also be ‘clawed back’ and used to pay creditors. For example, if the member has been making contributions of say $2,500 every month and then suddenly makes a huge contribution of $50,000 right before the bankruptcy declaration, there would need to be solid proof as to why this money was not used to pay off creditors. Other than these outlined stipulations, your funds will be protected while you fix your financial issues.
3. Pension and Lump Sum payments
Another concern is that, when filing bankruptcy, your pension and lump sum payments will be cut off and will have to be used to pay creditors. What happens is that only a certain amount of the money you have been receiving will be protected and the rest will go to creditors to settle any debt or financial issues you may have. There are certain guidelines for this and it is best to discuss these with an expert on SMSF funds and bankruptcy. However, a general guideline is that usually half of what you have been receiving is what will be available based on your total income. Again, this is a general guideline and you should always check with a financial advisor.visit their website http://www.bostonglobe.com/business/2015/03/23/karmaloop-files-for-bankruptcy/QaSNMcwcIFhWn07PTYHPWK/story.html to get latest updates.
In conclusion, bankruptcy is something that is very unpleasant to deal with and to overcome when you have a Self-Managed Super Fund. However, with the right knowledge and help available, you will be able to overcome this hurdle and have future financial success.