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Released every month our debt collection blog contains news, stories and tips to keep you informed.

The Consequences of Bankruptcy

Tuesday, July 30, 2019 - Posted by Michael McCulloch

If you have worked in the debt collection industry for any period of time you would have spoken with people who believe that bankruptcy is the only way out of a financial mess.

While this may be the case for some people, at times they may not be fully educated about the consequences of taking this path with an emotional decision being made rather than a rational decision. We are not implying that it is your role to talk someone out of bankruptcy, however, always ask the person whether or not they understand the consequences of their decision. So what are these consequences?

Bankruptcy Can Impact Income and Employment
A person earning over the indexed amounts may be required to make compulsory payments to the Trustee. The base income threshold amount for a person with no dependents is currently $57,866.90 with the index rising to $78,698.98 for person supporting over 4 dependents. Compulsory payments are calculated by the Trustee and can be paid to creditors to reduce their liability.
While bankruptcy does not stop someone from being employed there are professions that impose restrictions and licence conditions on bankrupts. Some professions do not allow the management of Trust Accounts such as those held by accountants or Solicitors by a bankrupt nor can a bankrupt be a Director of a company, manage a company or hold certain public positions.

Not All Debts Are Released
Most unsecured debt are covered once a person files for bankruptcy however not all. Some exceptions include Child Support, HECS and HELP debts, penalties imposed by Courts and fines. Debts owing to Centrelink, the ATO, Victims of Crime and some toll fines may not be covered and enquiries should be made by the bankrupt to see if the bankruptcy covers them.

A Life on the National Personal Insolvency Index (NPII)
As a bankruptcy a record is maintained on the NPII for life. This is a searchable public register that records insolvency proceedings in Australia.

Obtaining Future Credit
Some creditors ask if a person has ever been bankrupt. This must be disclosed at the time of the application. Credit Reporting Bodies also keep a record of personal insolency for 5 years from the date of bankruptcy or 2 years from when the bankruptcy is discharged by law (whichever is later).
The indexed amounts pertaining to credit limits allow a bankrupt to apply for credit, such as goods or services on credit, hire purchase, leases, etc up to $5,778. Amounts over and above this the bankrupt must disclose they are bankrupt to the organisation providing them with credit.

Restricted Overseas Travel
Planning an overseas holiday? As a bankrupt permission must be sought from the Trustee to travel overseas. It is an offence to travel overseas without obtaining written consent from the Trustee.

Assets Can Be Sold
The Trustee in Bankruptcy may elect to sell assets, including real property, in which to satisfy creditors. Any assets must be declared to the Trustee and these assets must not be disposed of by the bankrupt.

Discharge of Bankruptcy
Bankruptcy usually last for 3 years and 1 day from the date the person files for bankruptcy or, where a creditor commences the bankruptcy proceedings, 3 years and 1 day from the date the Statement of Affairs is filed. In some cases a Trustee may apply to the Court to extend the automatic date of discharge for up to a period of 8 years.

This is not an exhaustive list of the restrictions that a Trustee may impose on a bankrupt. This list has been provided in good faith so that you may better educate people you come across in your day-to-day role about the possible consequences of their decision.

If you have any questions we urge you to speak with a qualified legal practitioner, Trustee or Collection Law Partners.

Disclaimer: This article is general information only and does not constitute legal advice and is not intended to be relied on in any way.


Typo Error Results in Creditors Statutory Demand Being Struck Out

Friday, March 29, 2019 - Posted by Michael McCulloch

In a recent matter before the Supreme Court in Victoria a Creditors Statutory Demand has been set aside by the Court on the basis that the demand was incorrectly addressed.

By way of background the Plaintiff, Mills Oakley, commenced proceedings against the Defendant, Assets HQ Australia, in the District Court in NSW and obtained a Judgment in October 2018. A Statutory Demand was issued in respect of the debt for $158,905.67 which remained unpaid. Pursuant to s459C(2)(a) of the Corporations Act a company is presumed to be insolvent if it has failed to satisfy a Statutory Demand within 21 days of service being effected.

In the proceedings Mills Oakley v Asset HQ Australia Pty Ltd [2019] VSC 98, the Plaintiff relied on non-payment as a presumption of insolvency and commenced wind-up proceedings in the Supreme Court however Solicitors for Asset HQ Australia argued that there was insufficient evidence of the Statutory Demand being served. The basis of this argument focused around:

  • the registered companies address being noted as "Pacific Way" rather than "Pacific Highway" on the Demand;
  • the company claiming to have never received the Demand; and
  • the Plaintiff being able to prove that service was affected by Australia Post.
In the decision handed down it was determined by the Court that as there was insufficient evidence of service being effected. The Court was not satisfied that the Demand was served at the Registered Office of Asset HQ Australia and noted in the Judgment:
  • the Demand was not addressed exactly as it appeared in an ASIC search;
  • the claims by the Plaintiff that there was no "material difference" or "practical difference" between "Way" and "Highway" was not to the point. "Way" was not the Registered Office of the Defendant; and
  • The fact that the envelope was not "returned to sender" is insufficient evidence of the Demand having been served.
Judicial Registrar Matthews who heard the matter has indicated he will hear from the parties as to future progress of the matter and Costs.

Top 5 Bankruptcy Regions for the September Quarter 2018

Thursday, November 29, 2018 - Posted by Michael McCulloch

We saw last month that Personal Insolvencies Fall in September Quarter 2018 however how does this breakdown across a suburb by suburb basis across Australia?

This month we look at the top 5 regions with the highest number of bankruptcies.

New South Wales

Across greater New South Wales we saw 1,371 people entering into bankruptcy however this is a reduction of 5.1% compared to the previous quarterly statistics.

Suburb Region New Bankruptcies 
Campbelltown Greater Sydney 71
Wyong Greater Sydney
66
Mount Druitt Greater Sydney
65
Newcastle Rest of New South Wales 58
East Lake Macquarie    Rest of New South Wales 37

Victoria

Personal insolvencies fell overall during the September quarter 2018 in the Greater Melbourne region.

Suburb Region New Bankruptcies 
Casey - South    Greater Melbourne 73
Wyndham Greater Melbourne
62
Whittlesea Greater Melbourne 50
Geelong Rest of Victoria 51
Ballarat Rest of Victoria 36

Queensland

The Sunshine Coast of Queensland had the greatest number of new personal bankruptcies for the September quarter 2018.

Suburb Region New Bankruptcies 
Browns Plains Greater Brisbane 71
North Lakes Greater Brisbane
65
Springfield / Redbank    Greater Brisbane 62
Townsville Rest of Queensland 115
Ormeau / Oxenford Rest of Queensland 106

South Australia

The Greater Adelaide region of South Australia saw personal bankruptcies falling 20.1%

Suburb Region New Bankruptcies 
Onkaparinga Greater Adelaide 55
Playford Greater Adelaide
39
Salisbury Greater Adelaide 37
Limestone Coast Rest of South Australia 22
Murray & Mallee    Rest of South Australia 15

Western Australia

Insolvenices in Greater Perth fell 5.00% with Wanneroo in Greater Perth recording the highest number of new bankruptcies.


Suburb Region New Bankruptcies 
Wanneroo Greater Perth 106
Swan Greater Perth
85
Rockingham Greater Perth 70
Bunbury Rest of Western Australia 44
Wheat Belt North    Rest of Western Australia 21

Tasmania

The Greater Hobart region saw a reduction of new personal bankruptcies of 6.6%

Suburb Region New Bankruptcies 
Hobart North West    Greater Hobart 23
Brighton Greater Hobart
15
Launceston Rest of Tasmania 22
Devenport Rest of Tasmania 16
North East Rest of Tasmania 12

Northern Territory

The Greater Darwin region only saw 48 new personal bankruptcies being filed. This represents a reduction of 32.4% compared to the September quarter 2017.

Suburb Region New Bankruptcies 
Palmerson Greater Darwin 17
Darwin Suburbs    Greater Darwin 14
Darwin City Greater Darwin 13
Alice Springs Rest of Northern Territory 13

Australian Capital Territory

Belconnen in the Australian Capital Territory saw the largest number of personal bankruptcies being filed with 34 for the September quarter 2018.

Suburb Region New Bankruptcies 
Belconnen Greater Darwin 34
Tuggeranong    Greater Darwin 13
Gungahlin Greater Darwin 12

The heatmap below demonstrates the insolvency hotspots for the quarter -





Personal Insolvencies Fall in September Quarter 2018

Tuesday, October 30, 2018 - Posted by Michael McCulloch

The Australian Financial Security Authority (AFSA) are reporting that personal insolvencies fell 9.7% in the July to September 2018 quarter.

The personal insolvency statistics for this quarter show that the number of new total personal insolvencies reduced from 8,194 to 7,400 with only NSW recording a rise of 0.4% The rise in NSW has been attributed to an increase in consumer Debt Agreement Proposals (DAPs) and Personal Insolvency Agreements (PIAs). Bankrupties were at a record quarterly low in South Australia with Tasmania also recording their lowest quarterly level of bankruptcies since 1989.

Business related personal insolvencies, where an individuals bankruptcy is directly related to his or her proprietary interest in a business, represented 17.8% of total bankruptcies filed Australia-wide with the Australian Capital Territory recording the greatest increase across all States and Territories of 8.33% over the last 12 months.

Further information about the statistics can be read online at Guide to Personal Insolvency Statistics.


Debt Agreement Reform

Tuesday, October 30, 2018 - Posted by Michael McCulloch

The Bankruptcy Amendment (Debt Agreement Reform) Act 2018 received Royal Assent on Thursday, 27 September 2018 with a majority of the amendments commencing on Thursday, 27 June 2019.

The reforms have been passed in an attempt at tighter regulation and greater protections for people entering into Debt Agreement Proposals (DAPs). The Bill was passed in with several key amendments including:

  • the prevention of a debtor from giving AFSA a DAP if the total proposed payments exceed the debtor's yearly after-tax income by a prescribed percentage;
  • doubling the current assets eligibility threshold from $113,350 to $226,700. This is in response to the growing value of the Australian property market and will allow more debtors to enter into DAPs that were previously not eligble owing to the lower asset eligibility threshold;
  • limiting the length of DAPs (in line with the current bankruptcy provisions) to 3 years however allowing debtors the flexibility to vary the DAP to a maximum of 5 years if there is unforeseen circumstances that are likely to prevent them from completing the DAP;
  • allowing debtors who own or have equity in their principal place of residence to propose a DAP up to 5 years and to exempt those debtors from the requirement to comply with the payment to income ratio;
  • providing the Official Receiver with the ability to reject a DAP that would cause undue financial hardship to the debtor;
  • the setting of stricter practice standards for Debt Agreement administrators including compulsory registration; and
  • the requirement for Debt Agreement Administrators to hold and maintain Professional Indemnity and Fidelity Insurances as a requirement for registration.

In a media release to the public Attorney-General, Christian Porter, said, "Debt agreements are an important and increasingly popular alternative to bankruptcy for individuals who are facing financial difficulty. But, over time, it had become clear that aspects of the debt agreement framework and some in the industry were putting financially vulnerable people at risk of entering into agreements which were not affordable – further compounding financial stress. The Coalition's reforms not only protect the interests of debtors and creditors by ensuring that debt agreements are reasonable and sustainable, but it will also improve professional standards in the debt agreement administrator industry. Debt agreement administrators deal with some of the most vulnerable people in our community, and the Bill professionalises the industry to reflect its important function."


AFSA Regional Quarterly Insolvency Statistics June 2018

Thursday, August 30, 2018 - Posted by Michael McCulloch

The Australian Financial Security Authority (AFSA) has recently released their regional personal insolvency statistics for the June quarter 2018.

Debtor increases were seen across all regional areas, except Greater Hobart and the Australian Capital Territory, between the March quarter 2018 and June quarter 2018. Wanneroo in Western Australia recorded the most personal bankruptcies being filed with 117 followed by Wyndham in Victoria (93) and Wyong in New South Wales (89).

The regional statistics report on all debtors who became bankrupt or entered into a debt agreement or personal insolvency agreement during the quarter. The number of debtors is measured as follows:

  • The number of debtors who become bankrupt under a Debtor's Petition, Sequestration Order or Part XI Deceased Estate bankruptcy administration in the quarter.
  • The number of debtors whose debt agreement proposal were accepted by Creditors in the quarter (Part IX Debt Agreements).
  • The number of debtors whose personal insolvency agreement proposed were accepted by Creditors in the quarter (Part X Debt Agreements).
Where a debtor does not disclose their main cause of insolvency it is taken as being non-business related.

The quarterly regional personal insolvency statistics can be downloaded for each State and Territory using the links below:


The full reports can be downloaded from the Quarterly Regional Personal Insolvency Statistic Reports.



Release of New Bankruptcy Notice Warning

Monday, July 30, 2018 - Posted by Michael McCulloch

The Australian Financial Security Authority (AFSA) has recently published a fact sheet that they recommend be attached to all future Bankruptcy Notices.

The fact sheet, Warning - You May Be Declared Bankrupt, outlines to the Judgment Debtor the options available to them rather than ignoring the Bankruptcy Notice or unintentionally committing an act of bankruptcy.

AFSA claim that by providing this information it will potentially shorten the administrative burden on Creditors, Judgment Debtors and Trustees with the possibility of potential bankrupts making arrangements to repay their Creditors or contest a Bankruptcy Notice sooner rather than later.

Feedback can be provided to AFSA about the document via stakeholders@afsa.gov.au by 30 July 2018.

Source: AFSA Newsroom - July 2018

Alternate Download Source


Trustee Discloses Likely Bankrupt Professions

Monday, July 30, 2018 - Posted by Michael McCulloch

In a recent interview with nestegg.com.au, principal registered trustee, Andrew Aravanis of Aravanis Insolvency, has disclosed the professions most likely to file for bankruptcy based on their own 2017 client base.

Making the top 5 professions were:

  1. Managers (sales, marketing, PR, business administration, ICT)
  2. Machine and stationary plant operators
  3. Road and rail drivers
  4. Business, human resource and marketing professionals
  5. Health professionals (nurses and midwives)

In the interview Mr Aravanis said that those filing for bankruptcy did not appear to share any common traits apart from being in severe financial difficulty caused by redundancy, family breakdowns or bereavement. He went on to say, "Although it is happening slowly, more and more Australians are realising that bankruptcy is actually a valid choice when faced with overwhelming debt. With more information on how to navigate bankruptcy and with the stigma fading away, thousands of Australians are choosing personal insolvency options like bankruptcy to help them to move on from an unmanageable financial situation and a highly stressful emotional position."

Mr Aravanis went on to say that those experiencing financial difficulty can access professional services for free. Some of these services include the National Debt Helpline or finding a financial counsellor through Financial Counselling Australia.

Debt Management Firm Fined Over Misleading Ads

Thursday, June 28, 2018 - Posted by Michael McCulloch

Fox Symes and Associates have recently been fined $37,800 in penalties for making potentially misleading statements in their advertising.

Following an investigation by the Australian Securities and Investments Commission (ASIC) they found that the debt management firm undertook a number of potentially misleading representations on their website, banner advertisements and Google ads. These representations included "Free Debt Assistance", "reduce Debt in Minutes" and "15sec Approval".

The concern of ASIC in this instance was that the statements being made misrepresented the speed and cost of Fox Symes and issued the company with 3 infringement notices. In a statement to the media ASIC Deputy Chair, Peter Kell, said, "Debt management firms are often engaging with particularly vulnerable consumers who are seeking assistance with their debts. They should be careful not to misrepresent their services using high impact terms like ‘free’, ‘minutes’ and ‘seconds’ suggesting that debt assistance will be quick and at no cost".

Fox Symes have since voluntarily amended it advertising once ASIC highlighted the issues. ASIC have indicated that payment of an infringement notice is not an admission of contravention, but rather, they can issue an infringement notice where they have reasonable grounds to believe a person or corporation may have contravened consumer protection laws.

Source: AustralianBroker - May 2018


West Australians Seeking Bankruptcy in Record Numbers

Wednesday, May 30, 2018 - Posted by Michael McCulloch

New figures from the Australian Financial Security Authority (AFSA) this month reveal that a record number of West Australians are being forced into bankruptcy.

During the December 2017 - March 2018 quarter there were 545 bankruptcies recorded which equals the largest number of bankruptcies in the State since 2003 and an increase of 16% compared to the same period last year. Other States and Territories were steady with the number of bankruptcies being filed except in country NSW where there was an increase for the third consecutive quarter.

Adding in Part IX and Part X Debt Agreements into the equation a further 1,020 West Australians faced financial difficulty and entered into Debt Agreements to at least partly satisfy their debts to Creditors.

With Western Australia accounting for approximately 13% of all insolvencies nation-wide, AFSA did note that there was a slight fall in national numbers with Debt Agreements largely declining.

Read the personal insolvency statistics in full for the March 2018 quarter here.

Source: Perth Now - May 2018

Source: AFSA - Media Release May 2018



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