From time to time I come across age pensioners whose life is now miserable because they’ve found themselves with what is to them, overwhelming credit card and other debt. On a pension, unless they leave themselves short, they often find that can’t make the repayments.

When talking to me, some of them have broken down and cried when they have realized that, with dignity, bankruptcy can cancel this debt and release them from this dreadful position.

They mostly don’t know that their bankruptcy will last for only 3 years.

They all say that they didn’t know that as a bankrupt, by law they can (each) earn a minimum $758.80 a week net, that’s after tax, that’s weekly spending money, before any of it can be taken off them by their bankruptcy trustee.

Mostly, to a man or woman they tell me that they don’t earn that much anyway. But it’s true, it’s the law, and it changes (upward) every March and September.

A single age pensioner receiving a maximum pension of $537.70 per fortnight, which is $268.80 per week, is way below this $758.80 per week figure.

As a couple they can receive $449.10 age pension per fortnight, so that’s 224.55 each per week, still way below the $758.80 each figure, and keep the lot.

What this means is that if an age pensioner (who rents) goes bankrupt, they can stop paying their debts like credit card and most other loans like that forever, and so keep the full amount of their pension to buy food, and to live on.

If you’ve got property like a house or a car I’ll come to that shortly.

Most however feel that that’s not right, that they were brought up in the era where you had to pay your debts. But that era also required the banks and other lenders to act more responsibly in deciding who to lend money to, and how much, than is the case today.

There seems to be a lack of balance in responsibility now.

If you feel that despite everything you don’t want to go bankrupt, well, bankruptcy law has attempted to provide a solution there too. In reality the solution is generally out of the reach of people living off an age pension, and maybe a few extra dollars too.

In bankruptcy law terms, these solutions are either called a Debt Agreement Proposal, or there’s a Personal Insolvency Agreement. For age pensioners, both could be a bit expensive to set up. They also mostly seem to keep you still saddled with your debt, and a repayment regime spreading over a number of years, and coming out of your pension still.

In addition, with the Personal Insolvency Agreement procedures, (but not a bankruptcy) the fact that you’re attempting to come to some arrangement to pay off your debt like this has to be advertised in both a local and national newspaper.

I can’t see many pensioners, or anybody else for that matter, wanting to be shamed in this way, nor do I think that they should be.

Furthermore, with both of these scenarios, if the wheels fall off again and something pops up which makes it difficult or impossible to keep up the repayments, as they’re more likely to do as we get older, then you’re in trouble again.

If you don’t want to go bankrupt, then with these other two options, there’s then a bit of a routine and procedure that the law sets out to happen, to try and get your repayments frozen again for a while, or reduced. More cost for you, and they don’t go away.

I think that a better answer is for you, after you go bankrupt, is to voluntarily just set aside what you can, and when you can, and then just chip away at the debt, if you want to (but by law you don’t have to), at your own pace, and in your own time. Look at as being a bit like the old saying “a dollar down and a dollar a week”.

Nobody can make you do this though, as bankruptcy cancels the sort of debt that I’m talking about.

In an overwhelmingly majority of cases, bankruptcy lasts for 3 years, and in that time, or at the end of it, by law, you don’t have to pay back this debt again, ever. Some shady debt collectors may tell you that you do (and there’s a few around like that), but that’s not right.

Another great relief for age pensioners is that their bankruptcy is not advertised in the media anywhere. It’s very private. If you bankrupt yourself then you don’t have to go to Court either.

Your bankruptcy is recorded with the commercial credit rating agencies for 7 years though, so you will find it hard, if not impossible, to get credit or a loan again from the normal banking sources in that time.

Bankruptcy will cancel your credit cards, but these days some banks offer Visa debit cards, which can only be used if you have money in your bank account to immediately cover the cost of what you buy when using one, but at least you have a Visa card again.

The government also records your bankruptcy status on a database called the National Insolvency Index, and its there for life, and some information is accessible to the public, for a fee. To pensioners, I can’t see that this would be an issue at all.

Most age pensioners are also very relieved to be told that even though they go bankrupt, they should be able to keep their car.

As a bankrupt you can keep a car where your (net) equity in it is no more than $6,300, and that’s its wholesale value, not its card yard price. Age pensioners who are renters rarely have a late model car, so again, this is mostly never an issue.

If you are paying your car off and there’s a Bill of Sale on it, the $6.300 net equity means it’s the bit that you own as distinct from the bit that the bank or the finance company owns.

To get a guide on this, simply compare what you still owe on the Bill of Sale with what you think that a car dealer would offer you, in cash, not as a trade in, for it if you tried to sell it to them today.

The difference that’s theoretically left after you paid the finance company out, would represent the bit that you own. If it’s $6,300 or less, you should be ok.

If you’re paying your car off like this though, you’ve got to be up to date with the repayments when you go bankrupt, and stay up to date if you want to keep the car.

Also, as a bankrupt, nobody is likely to come to the house to take your household furniture and belongings away. There may be a few exceptions here if the bankruptcy trustee was advised that the bankrupt had something really valuable, like a Mona Lisa hanging on the wall. (That’s a bit of an exaggeration of course).

The government says that it can sell or take off you, during the 3 years of your bankruptcy, things like lottery wins or prizes of value (buy tickets in somebody else’s name), assets left to you in a will in that time, your interest in the family home, land, money in your bank accounts (but not your pension income dealt with earlier), shares etc, antiques or other saleable property which are “of value” (the crucial words here are “of value”).

This is rarely is an issue with people of age pension age who are considering bankruptcy. You’re pretty much left alone.

If the age pensioner owns a house then that’s a bit of a worry, as generally the person’s equity in the house means that they could get a loan to pay off the debts being discussed in this article. I’d try not to go bankrupt if I owned a home.

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.

History: Continued

Since such banking practices were common in Italy, it has been suggested that the Italian words banco rotto, or broken bank, represents the true meaning of the term bankruptcy. Alternatively, some derive the word from the French banque, or table.

Finally, it has been possible to identify the origin of bankrupts from the ancient Roman mensarii or argentarii. They placed their tabernae, or table, or mensae in public places and conducted their business. Should they decide to flee with the money that had been entrusted to them, then all that would be left would be the sign marking the spot where they had conducted their business.

In 1557, 1560, 1575 and 1596, Phillip 2nd of Spain was forced to make public that four separate state banks were insolvent, and so Spain was the first country to declare bankruptcy.

In 1705, a statute was introduced into Anglo-American bankruptcy litigation. Accordingly, should a bankrupt make every effort to repay the outstanding debt, he would be rewarded with the discharge of the outstanding sums.

There is documentary evidence that bankruptcy was commonplace in the Far East. According to a law laid down by Genghis Khan, there was a clause that established the death penalty for anyone who became bankrupt three times.

Current Practices

In the past, for those businesses or individuals who found themselves in a position in which continued trading was not possible, there was little alternative but to close down.

However, things have moved on from this archaic and matter-of-fact treatment. The emphasis today is on restructuring the outstanding debt. This means that the original debt is reviewed in order to determine if there was any means whereby more favourable terms could be secured, so enabling trading to be maintained. In essence, therefore, the focus is on the remodeling of the financial and organisational structure of the debtors experiencing financial distress.

Bankruptcy fraud is classified as a crime. Under current laws relating to bankruptcy, typical common criminal acts include assets which have not been notified to the authorities, relevant documents which have been deliberately destroyed or withheld, various forms of conflict of interest, claims that have been knowingly misleading, false statements or declarations, and fee fixing or redistribution arrangements.

Where bankruptcy forms contain information that has been found to be false, this my lead to a charge of perjury, which is the act of lying or making false statements, that can be verified, on a material matter under oath in a court of law. Filing more than one petition for bankruptcy may not in itself be a criminal act, but it may well violate provisions of bankruptcy law.

In the U.S, laws relating to bankruptcy fraud are particularly focused on the mental state of the participant. Under established common law, the guilt or innocence of a person rested on whether they had committed the crime, and whether they intended to commit the crime.

Bankruptcy fraud is completely different from strategic bankruptcy, which itself may occur when an otherwise solvent company makes use of the bankruptcy laws for some specific business purpose. Although the latter is not designated as a criminal act, it may still act against the filer of the bankruptcy petition.

Bankruptcy – How To Succeed

Peter Radford writes Articles with Websites on a wide range of subjects. Bankruptcy Articles cover History, Role in Europe/US, Types, Prevention. Website has many more.

View his Website at: bankruptcy-how-to-succeed.com

View his Blog at: bankruptcy-how-to-succeed.blogspot.com

You are immediately free from debt and will not be responsible for any of your pre-existing debts. It is a fresh start for you and your family to start again and build yourself up from a position of strength. You are immediately protected from all existing creditors who form part of your bankruptcy. You should understand that it is extremely unlikely that you will be able to borrow money from a high street lender. It is not unusual for a self-employed person to obtain start up or project funding from a private source which is acceptable for an un-discharged bankrupt (providing the lender is aware of your circumstances). Once you are discharged from bankruptcy (usually after 12 months, but sometimes sooner) you will be able to rebuild your credit file.

Bankruptcy restrictions Following bankruptcy certain restrictions are placed on you. These are as follows: * You lose control of your assets (house, savings, expensive car (over £2500) * You cannot obtain credit for over £500 without the declaring that you are bankrupt.. * You cannot take any part in the promotion, formation or management of a limited company (LTD) without the permission of the court. * You cannot trade in any business under any other name unless you inform all persons concerned of the bankruptcy.

Is my occupation affected? If you go bankrupt then you will be automatically excluded from some professions:

For some other professions, dismissal would be at your employer’s discretion. Check your employment contract or consult your HR department or union.

Bankruptcy Pros and Cons

It could be that bankruptcy is the most suitable debt solution for you if your debt has become unmanageable and you can’t keep up your monthly repayments.. You may of been told that bankruptcy should be considered as a last resort, and that you should try an IVA (Individual Voluntary Arrangement), IPP (Informal Payment Plan) or DMP (Debt Management Plan) first, however this isn’t always suitable. What’s right for you depends entirely on your circumstances as these are all solutions to the same problem, but tackled differently. What sets bankruptcy apart from the other debt solutions is the potential to wipe off 100% of your debt and have you discharged from bankruptcy within 12 months. Once discharged you no longer have the bankruptcy restrictions placed on you. Favourable circumstances concerning bankruptcy

There’s no risk of bailiffs coming round and taking any of your belongings. Once you enter into the protection of a bankruptcy order, creditors can no longer harass you for your debts as they are no longer your responsibility. You can keep the tools of your trade, your car (providing it’s not over £2500), household goods, clothing, bedding and furniture. If you own your own property it will not be seized from you if it is in negative equity. However, if there is equity in the property then it will be seized. How bankruptcy affects you Once declared bankrupt you will be subjected to certain bankruptcy restrictions. You will not be able to obtain credit over £500 without informing the lender that you are bankrupt. Realistically, you will have difficulty obtaining any credit during the 12 months that you are bankrupt, but once discharged it will become increasingly easier and a discharged bankrupt will still be able to have a mortgage in the future. Bankruptcy will be recorded on your credit file for 6 years from the day that you were made bankrupt, despite the fact that you will be discharged from bankruptcy after 12 months. Certain occupations are also excluded from bankruptcy Some occupations are affected by bankruptcy and it is your responsibility to check your employment contract if you are at all unsure. Click here to see if your occupation is affected. What do you need to do? Seeking professional advice is the best way forward. You can complete an enquiry form and one of our advisors will call you back. Alternatively you can contact us directly. Start to gather all details of your creditors and what you owe, as well as a rough idea of your expenses. You will need this information later. If you’re not sure who your creditors are you can find them on your credit file. Request your credit file here.