Case study – going bankrupt

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.

The company put the project on hold because of financial uncertainty. 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 (as well as the $12,000 owing on her credit card, Amanda had $30,000 still owing on her home and car loans) 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.