Released every month our debt collection blog contains news, stories and tips to keep you informed.
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.
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  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:
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.
|Mount Druitt||Greater Sydney
|Newcastle||Rest of New South Wales||58|
|East Lake Macquarie||Rest of New South Wales||37|
|Casey - South||Greater Melbourne||73|
|Geelong||Rest of Victoria||51|
|Ballarat||Rest of Victoria||36|
|Browns Plains||Greater Brisbane||71|
|North Lakes||Greater Brisbane
|Springfield / Redbank||Greater Brisbane||62|
|Townsville||Rest of Queensland||115|
|Ormeau / Oxenford||Rest of Queensland||106|
|Limestone Coast||Rest of South Australia||22|
|Murray & Mallee||Rest of South Australia||15|
|Bunbury||Rest of Western Australia||44|
|Wheat Belt North||Rest of Western Australia||21|
|Hobart North West||Greater Hobart||23|
|Launceston||Rest of Tasmania||22|
|Devenport||Rest of Tasmania||16|
|North East||Rest of Tasmania||12|
|Darwin Suburbs||Greater Darwin||14|
|Darwin City||Greater Darwin||13|
|Alice Springs||Rest of Northern Territory||13|
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.
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 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 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 email@example.com by 30 July 2018.
Source: AFSA Newsroom - July 2018
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:
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
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