Case Study 1

Bankruptcy can be a good thing

I choose Bankruptcy over suicide said Maria Sangos matter of factly Mrs Sangos is a pensioner, In September,she owed more than $ 62,000 on five credit cards. She was being harassed daily by debt collectors,was on stress medication and suffering migraines and insomnia.Today she owes nothing , she is free from all debt collectors.She kept her car, a 2004 Holden Barina and most importantly she is alive. Mrs Sangos didn't own a house so she couldn't refinance or sell to pay her debts.Bankruptcy, or some other kind of insolvency plan was her only option.

Mrs. Sangos's story is the same often secret story of tens of thousands of Australians who have quietly gone bankrupt over consumer debts in the past few years and started again.More than 20,000 Australians did it in the last 12 months to June 2013 the overwhelming majority of these bankruptcies are just ordinary consumers with credit cards,store accounts and car loans not Gold Coast Business men or Townsville based investment advisers.

In the vast majority of bankruptcies there are no assets to recover so no A.F.S.A (Australian Financial Security Authority) fees apply.If assets are recovered to pay debts A.F.S.A (Australian Financial Security Authority) fees can be charged and can range into the thousands of dollars.

The current Limit on the value of a car that a bankrupt is allowed to own is $7200.00.On top of the over 20,000 bankrupts over 9000 Australians declared themselves insolvent and signed up for a Debt agreement under part 9 of the Bankruptcy Act. Debt agreements come with big fees and charges and debtors still have to repay a certain proportion of their debts usually about 70-80 per cent.They are saved from bankruptcy but there credit record is still marked with an insolvency.Mrs Sangos chose to declare herself bankrupt and start again her name will be placed on a register of bankrupt persons and even when she is discharged from bankruptcy, probably in three years, her name will remain on that list for life.

She will not be able to travel overseas without the permission of A.F.S.A (Australian Financial Security Authority) but Mrs Sangos says she had no plans or finances to travel anyway.Of course she will find it difficult to get a credit card or a personal loan again,"That's a good thing" she said.But things are changing for people who have been bankrupt.Yes there are lenders out there who will take a look at discharged bankrupts it really depends on the individual situation and it really helps to build a relationship with a lender if you are in that situation.

Non conforming home loans are for people who have had a problem in the past perhaps they have been through a divorce or for whatever reason they have defaulted on a loan If they can show they are now back on top with full time employment,they may be able to find a lender.How much risk premium you will have to pay depends on what type of credit issue you had.

Bankruptcy has no long term negative implications for most people Unless you are being headhunted for a top executive postings in big companies the chances are no one will go to the trouble to look up the register to see if you have been bankrupt.

Case Study 2

Bill was working in a contract role on a project with a mining company earning $1400 per week for 12 months. It was a long term project and Bill believed he would be in this role for the foreseeable future. He decided to purchase a home unit for $280,000 and a second hand car $10,000.

The mining company put the project on hold because of the financial uncertainty, Bills role was no longer required and he became unemployed. Because he worked on a contract basis he was not entitled to a redundancy payment from the company.

Bill thought he would find another job without too much trouble and applied for several without success. Managing his mortgage, car loan insurance and everyday needs soon became a challenge. He felt too intimidated to apply at Centrelink and check his eligibility for benefits, and so started relying on his credit card to pay for his bills.

Within 3 months he had run up a debt of $20,000 on his credit cards, and couldn't make payments for his unit or car. Bill became depressed about his situation and sought help from bankruptcydebthelp after his home unit was repossessed.

bankruptcydebthelp convinced Bill of his right to register with Centrelink and we assessed Bills financial situation. After careful consideration we advised Bill to declare himself bankrupt. While bankruptcy may seem like a drastic step, it provided Bill with a way out of his debt crisis and his depression. It let him make a fresh financial start and regain some control over his life.