If you’re in debt in Australia and are considering bankruptcy, then a concern might be the so called ‘Stigma of Bankruptcy’. These days it’s really hardly an issue.

Also, bankruptcy is not a last resort, to be avoided at all costs.

If a person’s got what to them is overwhelming debt, and they’ve tried to get on top of it, but can’t, then declaring themselves bankrupt is a very practicable and sensible step to take. Mostly, it enables a person to get out of debt and so give themselves the chance to start again, to get back on their feet, and so be able to get on with their lives.

The ‘Stigma of Bankruptcy’ is an old fashioned term. It probably was to be avoided at all costs back in days gone by, but its rarely an issue ttoday.

Back in the ‘Stigma of Bankruptcy’ days banks in Australia were strict and conservative with their lending practices. You at least had to have a face to face interview with a Loans Officer.

In those days people who went bankrupt were mostly in business. It was pretty obvious when a business suddenly closed down that something had happened. Everybody knew, people talked, the shame of the ‘Stigma of Bankruptcy’ hung low in the air.

These days the banks have changed things. Loans are made over the internet and telephone. Pre approved offers of loans come in the post. The lenders have simply changed the rules and the risks.

Ordinary people now go bankrupt. In the year ended 30th June 2007 there were 25,242 bankruptcies in Australia, and of that number only 4,821 of them were business related bankruptcies. The rest were ordinary people.

Over the last 5 years to 30th June 2007 111,176 people have gone bankrupt ( www.itsa.gov.au and there click About us, then click Statistics)

Some of these 111,176 people may live in your street. They may sit next to on the bus or tram or train going to work, they may be some of the people that you know at work, and through work. If you knew, you’d be surprised to find who has gone bankrupt.

Chances are that you’d know more than one of them. Did you first suspect that they may have gone bankrupt because you noticed the ‘Stigma of Bankruptcy’?

Also, of these 111,176 who were declared bankrupt in those 5 years, did you read about any of them in the newspapers? Every day now just check the Public Notices section and you’ll see what I mean. Bankruptcy is very private, the newspapers will not be the source of a person’s ‘Stigma of Bankruptcy’ fears.

You wont have seen it on television either, unless it was somebody high profile, and newsworthy.

The people who will know that you’ve gone bankrupt are the people that you owe the money too. Your bankruptcy trustee will tell them, you don’t have to.

Your local bank may not be told. The return address for credit card statements are a GPO box somewhere?

If a person goes bankrupt I think that the real ‘Stigma of Bankruptcy’ is with the people owed the money. It now seems that it’s the banks etc who don’t want to be caught with the stigma of having to report to their shareholders and so to the public at large, including their competitors and peers, that the management has lost some of it’s shareholders’ money by lending it to people who couldn’t pay it back.

If a person goes bankrupt, then unless they’ve got something of value that their bankruptcy trustee would be allowed to sell (and there are some restrictions on a trustee here as there are a lot of things that he can’t touch) then the creditors mostly won’t get paid much, if anything.

If a person goes bankrupt, then for the next 3 years they can earn a minimum weekly net take home pay of $758.80 (current at 1st January 2008) that’s after tax and child support, and if applicable, business expenses, before the trustee can claim any of this income.

The $758.80 base figure increases is adjusted twice a year and is more if the bankrupt has dependants. If the bankrupt earns more than the base amounts, (known as the Threshhold) , then they can keep half of whatever amount goes over the Threshhold amount, as well as the minimum $758.80 or whatever it is that applies to them.

A bankrupt’s weekly allowable income is not likely to cause any stress or stigma during the (usual) 3 years of bankruptcy.

The ‘Stigma of Bankruptcy’ will be felt by a bankrupt’s creditors, the banks and others.

As a person falls behind in paying their loans and credit cards and other debts, after a few months they start to look a bit shaky from a debt collection point of view.

A widespread practice now is that some cases the creditors on-sell these possible bad debts to companies willing to buy them, at a big big discount on what is owed. Its then up to the buyer to collect payment, and as far as I am aware, when they do they keep it all.

In this way it seems that the banks etc don’t have to report the sale of these debts at a loss as bad debts. Saves face, saves a bit of Stigma.

It’s the buyers of these debts, who are now second hand debt salesmen, who have to cope with a loss if they don’t get paid because the debtor goes bankrupt.

So that they don’t lose of their money, and carry the stigma associated with knowing that their gamble has lost, the debt collection tactics of these second hand debt salesmen can be very aggressive.

They wrongly claim that bankruptcy is the last resort, and they seem to rabbit on and on a bit about at the ‘Stigma of Bankruptcy’. But it’s hardly an issue.

A person is generally bankrupt for 3 years, and their credit rating is damaged for 7 years. Overwhelmingly, for most people, going bankrupt does not affect their employment in any way.

Overwhelmingly, being bankrupt does not mean that you cannot travel overseas in the 3 year period of your bankruptcy. You simply have to seek the written permission of your bankruptcy trustee. Again, in modern times, very little stigma is suffered by the bankrupt.

If you’ve tried and tried but for some reason you just can’t pay your debts, then through bankruptcy, the government has given everybody the chance to get out of debt, to start again, to get back on their feet, and so be able to get on with their lives.

The ‘Stigma of Bankruptcy’ is hardly an issue.

Bankruptcy is the word which will make your feet cold. This is because there are many misconceptions and wrong notions about this concept.  We frequently hear about many individuals and companies going bankrupt.  But we never try to go in depth of the concept. What exactly is bankruptcy? Well the answer is here. When an individual or a corporation is unable to meet the debts or pay off the bills, this legal proceeding helps them out. This proceeding officially announces that the person can no more repay his debts. The matter being legal, no creditor can thereon directly ask the borrower for debt repayment. The finances are now under the court’s control.The court appoints a liquidator for this purpose who arranges to make the payment to the creditors from the income or the assets of the individual. It is an arrangement which allows the borrower to pay off the creditor’s dues in the best possible manner, of course, under complete legal supervision.While filing for bankruptcy a person needs to prove in the court that he neither has any other income source nor the assets to pay off the debts. The person needs to prove that he has no option left but file for bankruptcy. This legal proceeding puts a curb on interest accumulation. And so what now needs to be paid is the proportion of the principal amount. The liquidator divides the income source and assets and pays off proportionately to the creditors.The main motive of bankruptcy is that the debtor can make a fresh inception in connection to matters that relate to finances.  As time passes, bankruptcy will not matter much if the individual has recreated credit lines and has improved his credit rating. He can now make a fresh start with finances and get a fair chance to better the credit score. Bankruptcy is not an end but it is a new beginning.

Ever consider bankruptcy as the answer to all of your financial woes? After reading this article, hopefully you will have a more balanced opinion on the advantages and disadvantages of declaring bankruptcy.

Bankruptcy happens involuntarily or voluntarily; either a creditor (owed $2,000 or more) takes a court order against you or you sign up and declare yourself bankrupt with the Insolvency Trustees Services Australia (ITSA) or a registered trustee. Bankruptcy is an option for protection from creditors for someone who cannot pay outstanding debts and cannot reach an agreement with creditors to repay through a flexible repayment plan or be discharged from all debt obligations. Usually those considering bankruptcy lack the resources to pay off creditors while meeting basic living expenses and have no sellable assets to repay creditors.

One can opt for bankruptcy voluntarily by lodging the following documentation: a debtor’s petition, a Statement of Affairs, and an acknowledgment that basically says that one is aware of the circumstances, effects, and consequences of bankruptcy.

However, opting for bankruptcy is a major financial decision that should not be taken lightly. Other options may be more suitable than bankruptcy and it is crucial that one considers all of the alternatives to bankruptcy before binding oneself to its lifetime ramifications. There may be other ways to get protection from creditors.

Declaring bankruptcy does not protect the bankrupt from being hassled by secured creditors such as banks, although it does protect the bankrupt from unsecured creditors such as major credit cards. For example, the credit card lender cannot legally ask for repayment while a secured creditor can simply take away assets that were covered by their security. Case in point, a bank can repossess a bankrupt’s home if the bankrupt misses a mortgage payment.

Alongside having to repay secured creditors, other creditors and payments which have to be paid despite declaring bankruptcy are: court fines and penalties , child support, fees relating to fraudulent proceedings, and HECS/HELP obligations.

Bankruptcy also negatively impacts one’s employment opportunities, ownership, earnings, and credit file. Certain industries are off limits for a bankrupt. A bankrupt employed in a restricted industry will have to look for another job in another industry and perhaps acquire a new set of vocational skills and certifications. Also, a bankrupt cannot be a company director without court approval.

A bankrupt is forced to live on a smaller income because of mandatory payments to a Bankruptcy Trustee if earnings are over a certain amount, which is determined by the government.

A bankrupt cannot own whatever he or she wants. A bankrupt can only own “necessary” household property and clothes, money or property bought with compensation payments, tools that meet a predetermined value, and a vehicle that meets a predetermined value. Check the ITSA website for current thresholds, restrictions, and updates at www.itsa.gov.au.

While a bankrupt can apply for and obtain credit, the credit line available for borrowing is limited to a predetermined value. One also has to ask for permission in order to borrow more than that predetermined value.

For seven years, a bankrupt’s name and personal information will be all over various credit reference agencies’ databases. After seven years, that information will be removed. Conversely, a bankrupt’s name and personal information will stay recorded on the National Personal Insolvency Index, a public record which is accessible by any person or organization that is willing to pay a fee. Having name and personal information in a permanent record makes it harder to obtain financing options.

For all of the aforementioned reasons, it is important to consider one’s circumstances and investigate all the options, weighing them against the benefits and consequences of bankruptcy.

New changes in the law also give more power to the government or the Bankruptcy Trustees to repossess assets that have been transferred before bankruptcy, depending on the deemed intention of the bankrupt to avoid creditors.

Normally, assets can be protected by giving assets to others (gifting assets) and placing assets in superannuation. Yet as of May 31, 2006, the Bankruptcy Act was amended to the effect that a trustee can take back property previously owned by the bankrupt and presently owned by a spouse or a family trust. Assets that were transferred to a party where common sense would say that the bankrupt made the transfer in order to evade paying creditors, and in addition, consideration for a property that was transferred from a bankrupt to a third-party, will most likely be taken back into the possession of a trustee.

Superannuation contributions that were made by a bankrupt before he or she became bankrupt can be taken back by a trustee if the intentions of making superannuation contributions were to avoid repaying creditors. This became effective from July 27, 2007 in response to a case in 1990, Cook v Benson, where a bankrupt had made superannuation contributions to numerous funds and still managed to enjoy an outrageously comfortable amount of benefits despite being bankrupt. Now the government and the court can take back superannuation contributions where they believe that the intention of those contributions was to avoid creditors, and an investigation of the bankrupt’s past history of superannuation contributions can be launched in order to determine if the intention of those contributions was to avoid creditors.

The main point is that bankruptcy is not a laughing matter, and it is harder for the wily to avoid being caught for trying to plan a comfortable bankruptcy situation.

To find a Pre-Screened Attorney in your area, please call our 24Hr Unbiased Attorney Referral Hotline at 661-310-7999.

Is your credit rating good or poor? If you’ve recently been turned down for a credit card, store card or loan, it could be because you’ve paid off everything so perfectly that you have no credit history. But it’s more likely to be because your credit rating is poor. And this means it could be difficult to get credit at a price you find attractive.

What Makes A Poor Credit Rating?

Applications for credit are scored using criteria on the application form. For example, home owners score higher than renters and it’s useful to be on the electoral roll. People tend to get a poor credit rating if:
– They have defaulted on payments in the past; – They have been made bankrupt; – They have paid bills late (arrears); – They have had County Court Judgements (CCJs) against them

Bankruptcies and CCJs stay on a credit file for six years, and it is hardest to get credit if these are the problem.

Banks, credit card companies and store card issuers also look at people’s credit report. This is a file maintained by a credit reference agency detailing people’s applications and approvals for credit, borrowings, payment record and electoral roll entry. Equifax and Experian are two of the biggest and best known credit reference agencies and are used by most of the lenders. Over time, a credit report can become quite large, with details of every payment made or missed for every credit card and loan.

How Will A Poor Credit Rating Affect You?

A poor credit rating can mean that a person is turned down for credit. At the very least, it makes it difficult to get a loan, credit card, store card or mortgage. Even if people manage to get these products, they rarely benefit from the same low rates and incentive offers as other credit card applicants. Instead, they may have to pay a higher interest rate, either permanently, or until they show a good record of payments on the credit card or loan.

To give an example, a person with an excellent credit rating could borrow money at an interest rate of under 6% (depending on the loan amount and the particular deal). A person with a poor credit rating might have an interest rate of well over 25%.

Loan Options For People With Poor Credit Ratings

People with poor credit ratings have the option of having a secured loan. This means that if they default their house can be seized to ensure that the lender is paid. For credit cards they could have a card with a high interest rate. There is also the option of a prepaid credit card. This is similar to a prepaid mobile phone card. The card holder tops the card up with money and can spend that amount in places where a credit card is needed.

How To Improve Your Credit Rating

Improving your credit rating can be simple. Make sure you are listed on the electoral roll and pay your bills on time. Finally, get a copy of your credit file from Experian or Equifax to make sure the details are correct. That way you won’t pay the price for someone else’s bad credit history.

Bankruptcy is something that is entered in to when a person cannot pay his or her debts. It means all the debts are written off. Sounds good right? Well it’s not that simple and there are many consequences. Individual Voluntary Arrangements were introduced under the Insolvency Act in 1986. They are considered an alternative form of bankruptcy but the consequences may not be as detrimental. They do, however, come with their own issues.

One of the biggest consequences of bankruptcy is the loss of control it brings. If you declare yourself bankrupt you will lose control of all of your assets. You will also be unable to get any credit over £250.

Individual Voluntary Arrangements (or IVAs as they are known) are an alternative to bankruptcy. Unlike bankruptcy IVAs are not made public. The agreement is made privately between the person in debt and those that they owe. Also, a person who has entered into an IVA is able to keep their job if they head up a company. However if you do enter into an IVA then you will lose control of your finances in that you must follow a strict budget and you are unable to get credit.

Both bankruptcy and IVAs are serious financial commitments and neither should be entered into lightly. If you are in debt then you should contact a debt counselor. He or she will be able to tell you whether either an IVA or declaring yourself bankrupt are the right options for you but they should never be seen as the easy way out. However if they are the only options then they can be beneficial so should not be overlooked due to social stigma.

IVA’s (Individual Voluntary Arrangements), are an increasingly popular way for those with financial difficulties to solve their debt worries.