Bankruptcy at 23

H

house proud

:eek:
A close friend of the family is considering bankruptcy for the low amount of $7,500 (and $3,000 that she owes to her family) $10,500 in total although family have said don't worry about their $3,000

20% of all bankrupts are now under 24 what is going on ???

She is on her own on a parenting payment and has been advised by a financial councillor to declare bankruptcy and to start fresh...She is unable to work due to severe health problems at the moment.
She went to a financial adviser from Mission to ask for assistance on how to cope with it all and with help in discussing payments with the creditors. Electricity accounts, bonds from previous homes etc...She has been too gullible in the past few years and has had too many people do the wrong thing by her, trying to help so called friends..Parking friend's cars in her yard and storage in her garage then she moves out to the promises of her friends that they would collect the gear etc etc and weeks later not collected, so behind in rent, bond owing etc etc. I know this is investors nightmare but this is the other side of the coin.

Now please I don't want to start a "I hate single mum,dole bludger" discussion etc etc I just want some advise for her...

The old saying "it is ok to make mistakes if you learn from them" certainly applies here :)

Anyway, they have told her the minimum amount she would be repaying, to them all, due to her income, would not be paid off for years and years and yet she would be debt free immediately, and free again in 3 years and "one day" :)
I am concerned that No "after bankruptcy" discussions were mentioned and I am wondering what implications will there be for one so young? :(
Home loans, peronal loans etc..
I know many advertise now "have you been bankrupt etc " but how sincere is it all ?
Has anyone, been there, done that? I know this can be a really personal issue and maybe if people know of others and how it has effected them long term or is it easy street once it has all be dealt with?

many thanks
cheers House Proud
 
Hi Houseproud,

Forgetting all of the other mess that your friend has got herself into with friends etc I would say she should consider declaring bankruptcy. This is not advice just observation of other peoples experiences. I have an employee working for me who had worked for me 15 years ago and decided to try his hand at running his own business. One thing led to another and he ended up in a marriage break-up with all his creditors chasing him.
At the time I advised him to work hard and do as much overtime as possible to avoid the stigma of bankruptcy and keep his good name. The reality is that once you enter into an agreement to pay someone off over a long period of time it does nothing for your name. I watched him work hard for two years to make all of his payments and in the end one of the companies decided to bankrupt him anyway.
That was four years ago. Since then he has still been working and managed to regain his borrowing ability although limited but at least he doesn't have that debt hanging over his head. Your friend could consider going bankrupt but still offering to pay the family over the next few years. The last thing you would want is to be on the wrong side of the family.
Anyway I wish her good luck and it is a very hard desicion to make.

Househunter
 
"The reality is that once you enter into an agreement to pay someone off over a long period of time it does nothing for your name. I watched him work hard for two years to make all of his payments and in the end one of the companies decided to bankrupt him anyway."
Ohhh thats hard..... thank you for giving me this info.....I will pass this on.
One thought, she was also told that if the courts find out she has has repaid family back whilst bankrupt they can "up the time to eight years" But again the family have told her it is ok, and not to worry they are more concerned over her health and welfare than a few dollars....
thank you again for sharing his experience with me..I wish him luck too!
cheers House Proud
 
The Y-man said:
Can't help much from a personal experience point of view, but try this resource for information....

http://www.itsa.gov.au/

Good Luck.

The Y-man
Click to expand...

thank you for this site, there are a lot of questions she still has this will be a great help over the weekend..

thank you for your time I appreciate it
House Proud
 
I had a friend quite a few years back, who got into a real mess financially. Her husband lost his high paying job & they were high consumers, renting an expensive house. She also worked. I can't remember all the details, but will try my best.

The husband declared bankruptcy, & then went on the dole (because if he had a job during the bankruptcy period he would have had to pay some of it back) They then rented a grotty little house in a housing department area. Wife went to the local neighbourhood centre & befriended all the locals.

By the time he was released from bankruptcy, she was well intrenched with the lifestyle. She knew her way around all the charities for handouts & had no intention of ever going back to work again. He on the otherhand, decided that he would now look for work, but, since he was now long term unemployed, with a bad attitude by this time, was now unemployable.

To cut a long story short, after several years of him looking for work & stressing that he couldn't find anything (he only wanted something if it paid decent $$) he became very bitter. His health deteriated and he ended up in & out of hospital. Eventually the marriage broke up & she moved into a Housing Commission property.

Not trying to scare you, but sometimes there are downsides to easy fixes.

Cheers
 
skater said:
I had a friend quite a few years back, who got into a real mess financially. Her husband lost his high paying job & they were high consumers, renting an expensive house. She also worked. I can't remember all the details, but will try my best.

The husband declared bankruptcy, & then went on the dole (because if he had a job during the bankruptcy period he would have had to pay some of it back) They then rented a grotty little house in a housing department area. Wife went to the local neighbourhood centre & befriended all the locals.

By the time he was released from bankruptcy, she was well intrenched with the lifestyle. She knew her way around all the charities for handouts & had no intention of ever going back to work again. He on the otherhand, decided that he would now look for work, but, since he was now long term unemployed, with a bad attitude by this time, was now unemployable.

To cut a long story short, after several years of him looking for work & stressing that he couldn't find anything (he only wanted something if it paid decent $$) he became very bitter. His health deteriated and he ended up in & out of hospital. Eventually the marriage broke up & she moved into a Housing Commission property.

Not trying to scare you, but sometimes there are downsides to easy fixes.

Cheers
Click to expand...

thanks for your story again I appreciate it...good and bad...She is already on her own :( ,homeless so to speak :( , no work either :( , so really, things can only go up for her with a clean start.. :) at this point in time she would give anything for a housing trust home :rolleyes: ..The rule now is for a single with one dependent you have to earn more than $42,000 before you have to begin to pay anything..Obviously a lot higher with a couple and another dependent
many thanks again for your time It is appreciated :)
house Proud
 
Hi House Proud,

I recommend your friend get some legal advice from a lawyer/solicitor before going with bankruptcy.

In my opinion $7k is not really worth bankruptcy. I am not a lawyer but from what I learnt at uni (which might not be correct to date) to be able to become bankrupt you must owe at least $2000? Therefore if she pays the loan down to below that amount, then she cant become bankrupt. But for that amount I dont think the creditor will make her bankrupt coz it will cost the creditor about $4k which i think will not be worthwhile for them to do that (unless they wanna teach her a lesson) as they will probably get nothing anyway.

The disadvantages of becoming bankrupt is that during the 3 yrs you cannot make a transaction over $3400 or carry on a business without disclosing to the third party that you are bankrupt. If you get a job and earn over the $40k or so threshold and hence liable to contribute income ,you cannot go overseas.

However, I think its possible to be discharged from bankruptcy within 6 months if she's unemployed and has no assets left.

Obviously the major disadvantage is that she picks up her life and decides to start investing in property for her future then its gonna be hard to get finance :mad:

But i reckon she should get professional advice as this will have serious implications in the future.
 
Bender said:
Hi House Proud,

However, I think its possible to be discharged from bankruptcy within 6 months if she's unemployed and has no assets left.

Obviously the major disadvantage is that she picks up her life and decides to start investing in property for her future then its gonna be hard to get finance :mad:

But i reckon she should get professional advice as this will have serious implications in the future.
Click to expand...


hi, many thanks for the advice...

I have read since my original post that to be discharged early it is only if you have been declared bankrupt prior to a certain date. It won't to apply to her..
there are many loan companies that now advertise " bankrupt" no problems?? Such as Assured home loans here in adelaide and other no doc loans? I guess one will never know until she applies further down the track..
Tricky situation really as she can't afford to see a lawyer or solicitor so it is back to free financial councilling.. She is still considering it although I really dont think she has much choice......
thanks again
cheers House Proud
 
Hello House Proud

It would seem your friend is being undermined by the 'advice' she is receiving.

She has tried to find help in repaying these debts honourably, yet has been advised to take a quick fix then all her troubles will be over.

In reality, her troubles will have only changed tracks.

Bankruptcy is shameful.

I don't care that nowadays we are all meant to be so liberal and forgiving and pretend that 'Oh, well, bad luck can happen to anyone. Look at all the rich and famous people who have been bankrupt, never mind, life goes on.'

Bankruptcy is awful. Bankruptcy taints people in a way that well-meaning never mind attitudes do not have to deal with.

Over the years various friends of mine have bankrupted and in my line of work I come across people who have bankrupted for relatively minor amounts.

It is often overlooked that the debts were to real people who have now lost all capacity to recover those debts, and in some cases this has caused severe financial and emotional hardship to the creditor.

I have lenders whose policy is to 'consider' bankrupts but believe me there had better be a good reason for it, not that it was just the 'easy' way out.

$7,500 is a small amount. Even if this took her 10 years to repay she would still be ahead. Bankruptcy stays on the Baycorp and other credit records for seven years, but for the rest of her life she would have to declare that she had been bankrupt, the shadow will never leave her.

Even many employment application forms require this statement, as do rental applications and other financial transactions, not just for borrowing money.

The likelihood of her becoming a property mogul are slim. She is an ordinary person 'doing her best' with little experience or resources to help her.

If the 'financial adviser' at the Mission has proved to be a dud, then she should search further afield for someone who can actually help her negotiate the formal repayment of these debts. I would suggest she have a chat with her case worker at Centrelink for a better referral and a practical and supportive way of dealing with this.

She sounds as if she is trying to get her whole life under control, not just the money. That is what case workers are for, to help people with the whole picture and to support them over an extended period of time.

George Bernard Shaw penned those memorable words:

Life is not meant to be easy, my child; but take courage -- it can be delightful.

and they are as true today as when he wrote them. Your friend is trying to behave courageously. Support her in any way you can to act honourably and with dignity. Would you extend your support to guaranteeing her application for a personal loan to clear the debts? Would you loan her the money yourself? Would her family? Anything is better than bankruptcy.

Good luck

Kristine
 
house proud said:
hi, many thanks for the advice...

I have read since my original post that to be discharged early it is only if you have been declared bankrupt prior to a certain date. It won't to apply to her..
there are many loan companies that now advertise " bankrupt" no problems?? Such as Assured home loans here in adelaide and other no doc loans? I guess one will never know until she applies further down the track..
Tricky situation really as she can't afford to see a lawyer or solicitor so it is back to free financial councilling.. She is still considering it although I really dont think she has much choice......
thanks again
cheers House Proud
Click to expand...
Check with the Law Society if a Lawyer would look at her case pro-bono (is that the word?) I had a very competant lady help out my daughter and not bill us.

Thommo
 
Dear House Proud,

This is another instance where I have to reccommend that everyone involved obtain and read a copy of the book, "The Richest Man In Babylon".

Instead of providing financial assistance, maybe you could draw up a list of your friends debtors and the amounts owed. From there, you may be able to contact the debtors, explain the situation that you friend is in (that other debtors exist and that bankruptcy is an option) and obtain an undertaking to reduce the amount owed pending your friend agreeing to a repayment schedule that would have her out of debt within 12 months.

With your friend's health and family situation, compassion on the debtors' side may give them back more than money.

Good luck

Glenn
 
For what it is worth...

In my view NOBODY should consider bankruptcy for such a small amount of money.

No matter how fun it sounds as a seminar story it is ugly messy and stuffs your life up for years.

I highly suggest a quick trip to http://www.foxsymes.com.au/Index.htm for your friend (no relationship to my company).

They are good, unbiased and really help.
 
In my belief she should try every thing else before declaring bankrupt due to the mess it makes of your credit rating. Sure she may one day be able to buy a house with a low doc loan, but the reality is that as mentioned before, her bankruptcy will stay on Baycorp for seven years and in that time she will not even be able to rent a VCR through Radio Rentals, let alone get any sort of personal credit even if she scores a high paying job in that time.

You said she was homeless at the moment, and that her family is prepared to waive the money she owes them. Is there any way perhaps that they can support her while she pays off her debts ie can she move back home with mum and dad to save on rent and expenses?

Nat :)
 
Even though this is an old post, I just had to clear up some preconcieved ideas on Bankruptcy etc.

For a creditor to make a person bankrupt it can cost them over $3,000- to do so, so for small debts they normally don't bother doing it.

For a person to make themselves bankrupt, it can cost anywhere over $2,000-, so for small debts it is not worth doing.

You will find that Debt Collection companies normally buy bad debts from lenders etc for a discount, sometimes around 10% of the actual debt, so for a $10,000 debt a debt collection company might pay $1,000- for it. The lender then writes the debt off and the collection company makes their money by hastleing the debtor to pay, and if they manage to get the debtor to pay well above the $1,000- they paid for it, they make money.

Most debt collection companies break laws when trying to get debtors to pay.
They cannot threaten the debtor with bankruptcy or by saying the sheriff wil come around and take all your poccessions etc. They can only ring between certain hours. I think off hand between 8am & 8 pm. They should not ring you at your workplace and I think they are only allowed to call you 3 times in any week. You can also request that you do not want any phonecalls and any correspondance to you must be in writing. To do this you must send them a letter requesting it.

If you are taken to court by the credtor or debt collection company, a court can only issue a warrant for a redirection of earnings (money to be taken from your income to repay the debts) if it is satisfied of the following:-

You are employed
You can pay necessary expenses
You can pay other known liabilities
There is no unreasonable hardship and
There are no other, more appropiate enforcement means.


I actually run a free community service called the Finance Help Line, to guide people who are in financial differculty and I am in the midst of finishing a website to be called www.financehelpline.com.au which will be a free information service for people in financial difficulty, which will also have information sheets regarding bankruptcy etc. The reason I am trying to get this site up and running is that there is no one place where a person can go to get information and also what their rights are. The site should be up & running in June 05.
 
Good luck with the website.

I think there is always a need for this sort of information expressed in layman's terms and without all the legal jargon and added expense. :cool:
 
skater said:
I had a friend quite a few years back, who got into a real mess financially. Her husband lost his high paying job & they were high consumers, renting an expensive house. She also worked. I can't remember all the details, but will try my best.

The husband declared bankruptcy, & then went on the dole (because if he had a job during the bankruptcy period he would have had to pay some of it back) They then rented a grotty little house in a housing department area. Wife went to the local neighbourhood centre & befriended all the locals.

By the time he was released from bankruptcy, she was well intrenched with the lifestyle. She knew her way around all the charities for handouts & had no intention of ever going back to work again. He on the otherhand, decided that he would now look for work, but, since he was now long term unemployed, with a bad attitude by this time, was now unemployable.

To cut a long story short, after several years of him looking for work & stressing that he couldn't find anything (he only wanted something if it paid decent $$) he became very bitter. His health deteriated and he ended up in & out of hospital. Eventually the marriage broke up & she moved into a Housing Commission property.

Not trying to scare you, but sometimes there are downsides to easy fixes.

Cheers
Click to expand...
This post shows vividly the destructive effects of the welfare alternative. Don’t risk it!

My own single mum sister considered selling her PPOR to get the rent allowance $30 a week regardless of the consequences. I yelled her out of it, took financial control (legally) and she is now OK.

Being bankrupt may seem OK but the repercussions of this path will haunt her future perhaps to the end above. Bank loans, insurance, jobs…

May I suggest simply being very frank and telling the debtor there is no way she can afford to pay it back. Offer to sell all non-essenitals TV and stuff and offer them $1k.

In sister's case she had a $4k car debt (very dodgy) and I put this option:

I offered $1k now end of action

or

Take her to court where as a low income earner AND should they win she will be ordered to pay back at $5 a month ( true story) to which payback will take about 50 years. :eek: And in 50 years time $5 will not buy a piece of paper to write the receipt on. :rolleyes:

Do the math via NPV.

They took the $1k.

They can say stuff it , but for $7k it is not worth their legal cost to again only have her declare bankrupt if they win.

It gives them a save face as at least we got something. Your friend has not wrecked her future and has paid some of her obligations.

I hope this helps, Peter 147
 
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