Case study 1
Amanda was working in a contract role on a project with an engineering company and earning $1,200 a week for almost 12 months. It was a large, long-term project and Amanda believed she’d be in the role for the foreseeable future. She decided to purchase a home unit for $260,000 and a good second-hand car for $16,000.
In the early days of the global financial crisis, the company put the project on hold because of the financial uncertainty the falling stock market created. Amanda’s role was not required and she became unemployed. Because she worked on contract she was not entitled to a redundancy payment from the company.
Amanda had thought she would find another job without too much trouble, and applied for a number of roles but without success.
Managing her mortgage, car loan and car insurance premiums soon became a challenge. She felt too intimidated to go to Centrelink and check her eligibility for benefits, and started relying on her credit card. She used it to pay her loans and insurance and got another card to pay for her everyday needs. Within three months she had run up debt of $12,000 on her cards, and couldn’t make the payments for her unit and her car.
Amanda became depressed about her situation and sought the help of a financial counsellor when both her home unit and car were repossessed.
The counsellor convinced Amanda of her right to register with Centrelink. This immediately gave her an income and a Health Care Card. The financial counsellor then did a thorough assessment of her financial situation and after, careful consideration, advised her to declare herself bankrupt.
While bankruptcy may seem like a drastic step, it provided Amanda with a way out of her debt crisis and her depression and left her to make a fresh financial start and gain some control over her life.
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Case study 2
Barry owed $1,800 on his credit card and fell behind with his house payments when he was retrenched. He didn’t know he could ask his bank for a hardship variation or about any of the other programs to assist people who are having difficulty paying their debts. He felt embarrassed by his situation and he decided to ignore his problems because thinking about the debts made him feel very stressed.
The bank took the matter of the credit card to court when Barry failed to make even the minimum payments. Barry ignored the court documents and didn’t attend the hearing. The court awarded $2,100 against him for the debt and legal fees.
The bank petitioned for Barry’s forced bankruptcy to recover the $2,100.
Barry’s only asset was the small amount of equity he had in his home. By the time of the court case Barry was several months behind with his house payment and the extra interest and penalties for non-payment also meant that his equity in the home was shrinking.
The trustee sold his home and used the proceeds to pay the credit card debt, his other debts and the trustee’s fees.