Help please: Bankruptcy and saving my house

[kathryn d]

No, I call it late because I always fully intended to pay it, but was unable to on time as it was tied up. What it was tied up in went south unfortunately and ceases to exist. It's not a 'dodge' to invest in the wrong business and end up losing everything. I didn't lose it all on purpose.


Me neither, which is why I always fully declare everything and work up huge bills as a consequence.

Your point is moot anyway as I'll never have $320k to pay them. So whether they force me into bankruptcy or I go voluntarily, what I have to pay them is $70k. So why shouldn't my wife be able to effectively switch places with me to have equity in property instead of cash in her bank account?

If you think of it that way, I'm not saving my houses at all, I'm losing my houses, and helping someone to get into property who would otherwise be unable to (she wouldn't qualify for a loan), and she'll be returning the favour by letting me live there

Perp,
This is what the OP said about his debt.
He knew he was taking a risk when he gambled with the money he owed the ATO. He figured he could walk away owing nothing, by declaring bankruptcy.
Who's to say he didn't lend his wife money, and now she can afford to pay out his equity. Afterall, he states she doesn't have a job, but can manage the mortgage payments....

 

[ianvestor]

i am struggling to comprehend how you get a PERSONAL debt of $320k

unless he bought a $300k property for $500k which I imagine wouldnt happen or some recession/depression which we havent had

But we have had a downturn even if not technically a recession... I bought my dev site for 1.22 at the height of the market (jan 2008) and after spending a LOT on DA and interest had to sell it for 1.1 in November last year.

Not hard to comprehend people losing even more than that.

 

[Perp]

He knew he was taking a risk when he gambled with the money he owed the ATO.

If you equate going into business with "gambling", I suppose. What's your point? Property investing is risky, too, and we both own property.

smileyface didn't have $320K in the bank, which he owed to the ATO, then decide to use the $320K for a business instead of paying the ATO; my understanding is that the $320K debt came about as a result of his involvement in a failed business. As coastymike pointed out, and without wanting to be too nosey about smileyface's particular circumstances, this could come about after the money's gone via a number of mechanisms, eg ATO revision of the status of payments, commercial credit intended to meet tax debts withdrawn, fraud by a business partner, etc, none of which involve any intention to defraud the ATO. I think it's mean-spirited to assume any unethical behaviour in the absence of any evidence. smileyface's responses to some of tom32's suggestions in fact imply that he's an ethical person.

I can see that you're 100% sure that you're way too smart to ever suffer such misfortune, but I prefer to think "there but for the grace of God go I".

He figured he could walk away owing nothing, by declaring bankruptcy.

Where did you get that from? He has $70K, and is planning to contribute $70K to creditors, via sale of his home to his wife, or to a stranger. Whoever buys it, it makes no difference to the outcome for creditors (provided it's sold at market value, which he states is his intention), so I don't know what you're referring to here.

 

[kathryn d]

I can see that you're 100% sure that you're way too smart to ever suffer such misfortune, but I prefer to think "there but for the grace of God go I".

I have never said anything about being too smart.
I said if I sign a contract, I honor it.
Maybe I have higher standards than some here.
Enough of this thread. It seems the ones that think it is ok to reneige on your obligation is ok, and will never change their mind..anymore than I will.

There is always more to a thread than the OP tells.
Sometimes you can read between the lines.
I usually know when something doesn't smell right.
And this stinks to high heaven.

 

[coastymike]

The fact is the bankruptcy laws in Australia are there. Kathryn does not live in Australia and therefore it is really not an issue for her to concern herself about. If the same laws apply in Canada she can either vote for these to be repealed or move to a country where the laws are different (such as Saudi Arabia).

She does not like the laws. However the laws exist. It is really something to take up with your local member of parliament if you have an issue or move countries. Simple as that. If the laws of a country say I must wear an orange kaftan whilst in public then I can either refuse to wear the kaftan and suffer the consequences or vote against the kaftan loving politicians. If however enough people like wearing kaftans and they vote to keep the kaftan wearing politicians in power and they don't repeal the laws then I must choose whether to wear a kaftan and abide by the laws or not wear one and face the consequences. Or I move countries.

Same as here. If you don't like the bankruptcy laws discuss with your member of parliaments, ask for them to be repealed and if the majority of the populace agree with you then they are changed. If you don't agree then don't do any business with anyone. And if you don't like that then consider leaving.

 

[kathryn d]

The fact is the bankruptcy laws in Australia are there. Kathryn does not live in Australia and therefore it is really not an issue for her to concern herself about. If the same laws apply in Canada she can either vote for these to be repealed or move to a country where the laws are different (such as Saudi Arabia).

She does not like the laws. However the laws exist. It is really something to take up with your local member of parliament if you have an issue or move countries. Simple as that.

I am a Permanent Resident of Australia, and I do live here.
Our rental properties are in Canada.

 

[coastymike]

Ok fair enough. This is something that you can rightfully be concerned about. Being concerned about something will not however change the laws.

 

[Wunderbar]

lol. The ignorance displayed by some of these posters is beyond belief

 

[Ausprop]

But we have had a downturn even if not technically a recession... I bought my dev site for 1.22 at the height of the market (jan 2008) and after spending a LOT on DA and interest had to sell it for 1.1 in November last year.

Not hard to comprehend people losing even more than that.

yeh know the feeling - one of my sites cost me $2.1m and I burnt over $200k in interest holding it and is now worth about $1.3m. Got a few such gems but apparantly there has been no recession and property has only gone down 5% at most so that's a relief!

 

[Ausprop]

lol. The ignorance displayed by some of these posters is beyond belief

agreed. apparantly it seems there is no need for bankruptcy protection because all loss can be foreseen and mitigated by insurance and anything else is just your own deliberate doings

 

[MTR]

lol. The ignorance displayed by some of these posters is beyond belief

Your right, but its coz I would expect most have never operated, run a business and really have no idea on the risks involved.

For me I personally see property investing as a walk in the park compared to running a business where you are employing people and have huge overheads and sometimes things happen which are totally out of your control.

Smiley seems to have bailed, don't blame him..... who needs to be kicked when you are down and out.



Cheers, MTR

 

[sanj]

it is a crying shame that there has been so much conjecture on the exact circumstances of the OP's situation.

he came in here asking for help and was quite forthcoming. he also appeared to accept that he had to hand over his 70k and was not looking to defraud the ATO

kathryn believes that isnt good enough and she is entitled to do so. surely that is enough for gods sake?? the poor guy has had to sit back and endure all sorts of silly jibes from her, what exactly has been gained after say the 15th time of saying that he should pay it back??

it was pointed out that a lot of us dont know much about the topic due to the taboo nature, i can definitely see why.

 

[Wunderbar]

Yeah because everyone who goes bankrupt is an Alan Bond or Christopher Skase

 

[BlueRidgeHomes]

Hi Smileyface, (great user name and if you are able to smile at the mo then even better),

My background is in banking and the best advice I can give you is to be open and honest with the bank. It's not in the bank's interest for you to loose your property - defaults if it results in that cost them huge amounts of money. I would recommend that you contact either your personal banker or if you don't have one then call the loans department within CBA and ask to speak to someone. Let them know that you are wanting to do the right thing and wish to retain the properties. If at all possible, you may find they will try and find a way to assist your situation.

All the best
Meg

 

[ProperTee]

Trying to find a good one that I don't have to teach along the way

PM me and I'll give you the details of one who knows what he's doing. He may not be able to help you save your house, but may be able to offer a strategy that will be as painless as it can be.

The concept of bankruptcy is that almost all proceeds are to be distributed amongst all creditors fairly. So, for example, if your total debt is $400k and one of your creditors is owed $100k, they will be entitled to 25% of the distribution, if any. You aren't allowed to pay anyone in preference to others and that includes transactions that occur prior to going bankrupt. So, transactions like you describe may well be considered to be preferential and therefore potentially voidable.

I'm not a lawyer or trustee, but I speak from personal experience. I suggest you check out www.itsa.gov.au which has a lot of info about bankruptcy. You can also download the act from www.comlaw.gov.au.

I wish you all the best with this and I can tell you that it's not the end of the world. If done well, it can open the door to a new start and take a lot of stress out of your life.

 

[ProperTee]

Actually, I am not sure if you could avoid it in this situation. A trustee is appointed once you enter bankruptcy. I think what would happen is you would be, or could be, released from Bankruptcy early. You would still have the stigma of having been bankrupt though.

Not neccesarily. During the 3 years of bankruptcy, you can make an offer to your creditors under section 73 and if accepted, your bankruptcy will be annulled, which means a total reversal as if it never happened. So your credit file will no longer have any mention of your bankruptcy.

The main thing is that it can be shown that the creditors will be better of by accepting your offer and that the funds are from a source that would not normally be available to them such as a loan or gift from a relative or friend.

 

[ProperTee]

he invested in a business and did his dough and is now virtually worth nothing... what do you want from the guy?

Yep, and probably kept some people employed along the way that would otherwise be unemployed. He is to be admired for having a go at it. It didn't work out, but he had a go, which is more than most of the knockers in this forum probably don't have the guts to do so they just pull out the sheers and go looking for tall poppies...even after they've already hit the ground.

I say good onya Smileyface and hope you come back to fight again!

 

[Terryw]

Not neccesarily. During the 3 years of bankruptcy, you can make an offer to your creditors under section 73 and if accepted, your bankruptcy will be annulled, which means a total reversal as if it never happened. So your credit file will no longer have any mention of your bankruptcy.

The main thing is that it can be shown that the creditors will be better of by accepting your offer and that the funds are from a source that would not normally be available to them such as a loan or gift from a relative or friend.

Thanks for that info Propertree. I didn't know that was the case. I have a friend who was bankrupt, but made an offer and had it annulled, so I will get her to check her credit report to see what shows up.

 

[ianvestor]

your bankruptcy will be annulled, which means a total reversal as if it never happened. So your credit file will no longer have any mention of your bankruptcy.

Not quite total reversal... the bankruptcy is recorded in TWO places: Your credit file, and the "National Personal Insolvency Index":

The Insolvency and Trustee Service Australia ("ITSA") is responsible for maintaining an index containing information on proceedings and administrations under the Bankruptcy Act, 1966.
This index is called the National Personal Insolvency Index ("NPII").

If your bankruptcy is annulled it is only removed from your credit history, but will remain forever listed on the NPI even if you're only bankrupt for one day.

 

[Perp]

If your bankruptcy is annulled it is only removed from your credit history, but will remain forever listed on the NPI even if you're only bankrupt for one day.

Interesting. Do lenders check the NPII as well as credit histories?