DEBT SOLUTION ARTICLES

1. BANKRUPTCY AND TRAVEL VISAS

Citizenship and Visa Applications in Bankruptcy

It all depends on the type of visa a bankrupt applies for. Information sourced as of April 2018

While all visa applications enquire into the applicant’s general character, bankruptcy does not affect visa eligibility as it is not a criminal offence. Therefore, in most cases, people applying for non business-related visas such as family visas or employer sponsored visas should be unaffected by the status of bankruptcy. The same applies to citizenship applications, which also assess applicants on good character, a criterion primarily related to criminal convictions.

Bankruptcy also does not limit someone from becoming a sponsor for a spousal or partner visa.

Bankruptcy becomes a factor when a person applies for entry to Australia via a business visa. In these cases, the Department of Home Affairs (formerly the Department of Immigration and Citizenship) looks at an applicant’s previous business experience in Australia, and will not consider this criterion satisfied if:

The applicant has been declared bankrupt in the last five years (which is permanently recorded on the National Personal Insolvency Index (NPII)).
The applicant has previously or currently is actively involved in a business or held a leadership/management position in a business that has experienced or is experiencing insolvency.
The business has suffered recent trading losses and the business is considered unlikely to be successful in the long term because of the applicant involvement or decision-making in the business.

The above is qualified by decision makers taking the following into account:

The applicant’s business history following bankruptcy.
Their level of decision-making in any insolvent entities.
Whether they have entered into numerous bankruptcies or been involved with multiple insolvent entities.
If there were any external, mitigating factors affecting liquidity that were outside the applicant’s control.

2. HOW DO I REPAIR MY CREDIT

With Comprehensive Credit Reporting having been introduced in 2018, there is more ways your credit can be affected by your repayment behaviour. Both Good and Bad.

How this works is, if you have a loan or credit card, the account will now show on your credit report, with a 2 year history of payments. You get a 14 day grace period to make your payment. If you make your payment within 14 days of the due date, the payment will show as OK. If you don’t or can’t make your payment this too will show. There is now nowhere to hide, your payment history is on show for anyone who runs your credit file. This could prevent you from borrowing money from a Bank or Finance company. If there is a good reason or explanation and it has only happened once you may be able to explain it away. If there are several non payments it will get harder, a lot harder. You may even have a exclusion – serious overdue account on your credit file. This is where you have been late on your payments for 3 months.

Lenders will want 2 years of clean, on time history for a good report and a favourable Interest rate. This automatically resets as you make your payments, so 2 years of on time payments after you have been late and it is clean again.

The more serious Defaults on a credit report will take 5 years to drop off, if it has been remedied. This will mean they haven’t been able to come to an arrangement with you to catch up payments and may have passed your Debt on to a collection Team or sold your Debt to a Debt Collector. This situation will take longer to recover from. Each default will drop off 5 years after it has been put on your credit report. But beware, if you have not addressed the situation with a payment plan, Debt Agreement or Bankruptcy, a Debt collector can put a new Default on each time they pursue you for the Debt. Your credit file could take a long time to remedy unless its addressed.

By taking action like a Debt Agreement or Bankruptcy no further defaults regarding those Debts can be put on your report. This will allow your credit report to reset in 5 years. Taking no action will probably see your credit report stay bad for the foreseeable future.

Can you have a default removed from your credit file?

You cannot have a default removed if it has been put there correctly. But if you have a default on your name that is not correct, or put there without due process, then AFCA the Financial Ombudsman can help have it removed.

If you are in an active Part IX Debt Agreement this will show an exclusion on your credit file. It will automatically drop off at the 5 year 1 month mark, provided you have completed all payments on your Debt Agreement. You will then have a Fresh Start. It will change to show you have completed the Debt Agreement. You can pay out your Debt Agreement earlier, the status will change to PAID, but the exclusion on your Credit Score will remain till 5 years has passed. If your Debt Agreement is not paid or you enter into a Bankruptcy it will restart the 5 years.

In the Case of a Bankruptcy that automatically discharges at 3 years, the exclusion on your Credit Score will stop at the 5 year 1 month mark. If the Bankruptcy runs longer it will be 2 years from whenever you are Discharged.

However once you have completed the Debt Agreement or been discharged from Bankruptcy, you will be able to approach specialist Lenders for Home Loans or Car Loans. Contact Money Buckets for Help in this situation.

On the positive side, your credit score will keep increasing with continued good payment.

So, there are some things which can still affect your credit file even if you are on time?

There are some Loans that will affect your credit regardless if you pay them on time. Quick payday style Loans and other High Interest loans are seen as Bad Financial Decisions and will adversely affect your Credit Capability. Be careful of Afterpay credit as well.

Having too many cards or Loans will not be looked upon as a good thing either and may prevent you from borrowing anymore.

Every time you make an application for a loan or credit card your credit score will drop. These enquiries are listed on your report and question may be asked why you have made so many enquiries, after all, who keeps asking for credit once they’ve been approved? So don’t just apply to multiple Lenders at once to see what can be done, this has prevented many people from obtaining a Loan even though they were only shopping around.

Money Buckets can check your credit report and asses your loan prospects without affecting your credit report. Contact us now to discuss.

3. HOW TO DEAL WITH DEBT COLLECTORS

* Courtesy of ASIC Australia’s regulating body for Business via their Moneysmart.gov.au website

The Dos and Don’ts of debt collecting

If you fall behind on your loan, credit card or utility bills, you might be contacted by a debt collector. Here we explain how to deal with debt collectors, and what to do if you are being harassed or intimidated by someone trying to recover a debt.

What is a debt collector?

A debt collector can be a person from a credit or service provider or from a debt collection agency. A debt collector may contact you to:

Provide information about your account
Demand payment from you or explain the consequences of non-payment
Offer to settle your account, make alternative payment arrangements, or review existing arrangements
Inspect or recover mortgaged goods (if they have a right to do so)

If you have not responded to previous attempts to contact you, or not kept to an agreed repayment plan, a debt collector can contact you to find out why.

Important: Are you being taken to court?

If you receive notice that you are being taken to court (such as a summons, statement of claim or liquidated claim), get free legal advice immediately. Do not ignore the notice. If you don’t take action, judgment may be entered against you. If that happens, the creditor may be able to enforce the judgment by repossessing your goods to sell and get their money back.

How and when debt collectors can contact you

Debt collectors can contact you by phone, letter, email, social media or by visiting you in person.

Smart tip

Keep good records of all communication with debt collectors. Include dates and times of contact, how they contacted you (e.g. by phone, in person), their name and company, and what was said.

Debt collectors must respect your right to privacy. By law, they cannot reveal that they are a debt collector or provide information about your financial situation to another person without your permission.

There are restrictions on the times debt collectors can contact you. For example, they should not contact you on national public holidays. Other restrictions include:

Phone: Debt collectors should not call you more than 3 times in a week (or 10 times in a month). Unless you agree otherwise, they can only call between 7.30am-9.00pm on weekdays, or 9.00am-9.00pm on weekends.
Face-to-face: They should not visit you in person if repayment arrangements can be worked out over the phone, by email or letter. However, if you do not respond to other attempts to contact you, they may visit you at home as a last option. They can only visit between 9.00am-9.00pm (weekdays and weekends), but no more often than once a month.
Social media and email: If a debt collector uses email, social media or similar technology to contact you about a debt, they must be reasonably sure that the account is not shared with another person and that their message cannot be viewed by anyone except you.

ASIC’s Michael Saadat talks about debt collectors and your rights when dealing with them.

Unacceptable behaviour by debt collectors

It is against the law for debt collectors to behave in any of the following ways:

Threatening, trespassing or intimidating you: This includes such behaviour as: threatening physical force towards you or anyone else; damaging (or threatening to damage) your property; blocking access to your property or blocking your way; remaining on your property when asked to leave, unless they have a Court Order. If a debt collector behaves this way, contact the police immediately.
Harassing or verbally abusing you: This includes shouting at you or making personal or demeaning comments; using obscene or racist language; or contacting you more than necessary or at unreasonable times.
Making false or misleading statements or engaging in deceptive conduct: For example, they must not make false statements about the money you owe or what will happen if the debt is not paid; send letters demanding payment that are designed to look like court documents; or pretend to be or to act for a solicitor, court or government body.

Debt collectors should not take advantage of you:

if you are disadvantaged because of illness, disability, age, illiteracy or other circumstances,

if you are not familiar with the law, the debt recovery process, or the consequences of not paying the debt.
If you believe a debt collector’s behaviour is unacceptable, you can complain or write to your lender using our sample letter of complaint about debtor harassment.

How to deal with a debt collector

If a debt collector contacts you, you should be cooperative but you have the right to be treated in a professional way.

You should also:

Be honest about your financial situation, including other debts
return calls from your debt collector, or respond to their correspondence promptly
agree to a repayment arrangement if you can afford it.
Do not agree to a payment plan you cannot afford
Tell the debt collector when your contact details change.
call Money Buckets to take over correspondence 1800 825 010. (There will be fees involved)
Hardship variation

If a debt collector contacts you about a personal loan, credit card, or home loan for a residential property (your home or investment property), you may be able to apply to change your repayment plan on the basis of hardship, if a court judgement has not yet been made. See applying for a hardship variation for more details.

Be wary of credit repair

It might sound like a good idea to pay someone to help you fix your credit problems but credit repair agencies may not always be able to do what they claim. Be wary of ‘credit repair’, ‘credit fix’ or ‘debt solution’ companies that claim they can improve your credit report. In most cases, default listings and other historical information cannot be removed from your credit report unless they are proven to be wrong. Find out more about what credit repair companies can and can’t do for you. Call Money Buckets on 1800 825 010 to discuss when your credit file will automatically repair if Debts are Controlled

Read our booklet (Moneysmart.gov,au) Dealing-with-debt-collectors

Our Dealing with debt collectors booklet helps you understand:

your legal rights and responsibilities if you owe money
what to do if a debt collector contacts you
what you can do if you have been treated unfairly by a debt collector
how to dispute a debt

Negotiating a repayment plan

If the debt is yours, but you will have difficulty repaying it, a debt collector may agree to extend your repayment period or allow you to make smaller repayments over a longer time. Be prepared to provide information about your financial situation to demonstrate what you can afford to pay.

Sometimes debt collectors will agree to finalise the whole debt if you make a lump sum payment of part of the debt. Only agree to pay an amount you can afford.

Be realistic about your living costs and other debts.
Work out what you can afford to pay.
Do not agree to a payment plan you can not afford
Make every effort to keep to a repayment agreement. However if you can’t pay what you have agreed to, contact the collector again as soon as possible to work out what is a reasonable and manageable amount for you to pay.
If you cannot make any repayments on a debt you owe, get free legal advice
Keep good records
If you reach an agreement with the debt collector, ask them to confirm it in writing or confirm the arrangements in writing yourself in a letter to them. Make sure you keep a copy of all letters you send or receive, as well as any receipts or other records of payment.
Store these documents together to avoid losing any important information.
If your repayment plan is rejected
If a creditor or debt collector rejects your payment proposal, explain your situation in writing, telling them how much you can afford to pay and how often.
They should not insist that you agree to a repayment plan that you cannot afford. Do not be pressured to borrow money from family friends or a lender.
If you cannot reach an agreement with your creditor or debt collector, consider contacting a free external dispute resolution scheme. See how to complain.

(Money Buckets Note: Most people find that they cannot handle this on their own. The Creditors are difficult to deal with, they are not experienced at Budgeting, they are not good negotiators. The whole process is too stressful and affects their Mental Health and their ability to continue to work. Especially as free services are often only available in work hours and have long wait times. This is where Money Buckets will step in, handle things at a time that is suitable to you and take over the payment arrangements and budgeting. We will also use part IX Debt agreements where possible to have as much legislative protection as possible on your agreement and Informal arrangements where this is not available or suitable)

Disputing a debt

Smart tip

Read any statements carefully as they might include recovery fees or expenses charged by the debt collector. Check your original contract to see if you have to pay these fees. Seek financial counselling if you think the fees are unfair.

If you think a debt is not yours or if you disagree with the amount owing, ask for your account information and copies of contracts. If the debt collector is acting on behalf of a creditor, they may refer your request to the creditor.

How to dispute a debt

If you want to dispute a debt because you do not owe it, you only owe part of it, or you think you have a good reason not to pay it:

Contact the lender, creditor or credit provider and tell them you dispute the debt

See if you can access a free external dispute resolution scheme. See how to complain.

Get free legal advice immediately

If you are contacted about a debt you have already fully repaid, explain the situation in writing to the debt collector and include copies of any records or information you have that prove the debt has been settled. If the debt collector continues to contact you, find out how to complain.

Disputing the amount

If you accept that you owe the debt but disagree with (or are unsure about) the amount claimed, ask for an itemised statement of your account that sets out:

The amount and date of the alleged debt

How it was calculated

Details of all payments made and all amounts owing (including principal, interest, fees and charges)

The debt collector should stop trying to collect any money until you have received this information.

A default listing on your credit report should not be made during this time.

Dealing with debt collectors can be stressful, but there are laws to prevent them from making your life a misery.

Ring 1800 825 010 Free Call to discuss any problems you may have

4. JOINT DEBTS AND PARTNERS

Many people come to Fast Debt Help, who have joint debts with a partner.

First and foremost you must realise that if the debt is joint, each person will be treated as if they owe the total debt. So if one person does not, or cannot pay, the creditor is entitled to chase the other person for the full amount of the debt.

This brings some stressful scenarios for people who have separated. Be under no illusion that if you have a joint loan, even if you have an agreement that your ex partner will pay it and they don’t, you will be chased for the total amount owing.

However, this debt can still be put in a debt agreement but will handle just that one persons obligations. The other person on the loan does not have to agree to this. They will have to handle their obligation separately. In Debt Agreements joint debts will always be shown as the full amount.

Because of this, where both partners are going into Debt Agreements and there is a considerable amount of Joint Debt, it may be more cost effective to look at an informal arrangement.

Generally speaking Debt Agreements are a more cost effective way to handle unsecured Debts, but the problem is, you cannot offer a Joint Debt Agreement. Where there is a large proportion of Joint Debts or it is the only debt, you can offer a Joint Informal Arrangement. In this case it can be a better option for all concerned.

Other than Joint Debts, an Individuals credit behaviour is their own. Your partners bad payment history will not affect your credit history. If you do a Debt Agreement or even go Bankrupt this does not affect your partners credit rating. The finance world recognises you as a unique individual.

So what do you do if your partner does not pay a joint debt? If you do nothing it will affect your Credit Rating. One option is to pay the minimum payments on this debt till you can rectify the situation. This will preserve your credit rating. If you are not in a position to do this, first talk to the Creditor, explaining the situation and try to come to a compromise. You can always contact Fast Debt Help to get the best way forward.

What do you do if your partner goes into a debt agreement and the Creditor chases you?

If you make the minimum payment the creditor can do nothing but must stop taking the payment once the full amount has been paid by you and the money they get from the debt agreement.

If your partner is a client of ours we would try and negotiate a payment plan for the other party to balance the debt.

5. WHAT HAPPENS IF I CAN'T MAKE A REPAYMENT ON MY LOAN OR CARDS?

What Happens If I can’t make a Repayment on my Loan or Credit Card?

Debts aren’t generally passed onto a collections department when you miss one payment or pay a few days later than you should have done. While different lenders will have their own process, typically you need to have missed several payments and not responded to letters and calls before an account will be passed onto collections.

If you feel you are getting into financial difficulty then you should look to contact your lender prior to missing any payments, to enquire as to whether you may be able to take a payment holiday, apply for hardship, or to discuss a repayment plan within your budget. If you can negotiate an agreement, this will usually prevent an account from being passed to a collections department as you have been pro active in dealing dealt with your financial problems and contacted your lender and brokered a repayment proposal or granted a payment holiday.

Individuals who do not face up to their financial difficulties and look to avoid dealing with them are more typically those who see their accounts passed to collections. If this is your situation and you are getting lots of calls from creditors or collection agencies asking for money and this is proving too difficult or you are not getting the help you require, its time to ring Money Buckets and get HELP.

If you do nothing this is What Happens Next:

If your account has been passed onto a collections department, your credit history will already have taken a hit and your account might already be considered to be in default. When your account is first passed on, you will usually receive a letter or email explaining that the collections department is now dealing with your account and a request for you to get in contact. While the thought of dealing with a collections department might seem intimidating, they are normally looking to work to resolve the situation for both parties. A collections agent may even come to your home and request a face-to-face meeting at your home to discuss what options are available to you and how they can work on a payment plan.

If you are uncomfortable speaking to a collections department on the phone, write to them explaining that you would prefer all correspondence to be in writing. You should aim to deal with your account with the collections department and come up with an acceptable repayment plan. This won’t change the missed payments or defaults on your credit file, but it will help you to work towards paying off your debt without the issue escalating further.

If things are becoming too hard to handle, especially when there is multiple collection agencies chasing you, give Money Buckets a call to take over on your behalf.

Failure to acknowledge the debt or to engage with a collections department could then lead to further action being taken.

Legal Action and Court Judgements

The next step a collections department will make is to pursue action through the courts to acquire a judgment and enforce the debt to ensure it is paid. Having court writs on your credit history can be hugely damaging, so you should look to avoid this outcome at all costs. You will have enough opportunity to deal with your account prior to legal action being taken, and if you are genuine about dealing with your debts or have Money Buckets negotiating on your behalf, there is no reason for this step to be necessary.

6. WHAT HAPPENS IF I CAN'T PAY MY TAX

The First step is always to contact any Creditor and have a chat when you are going to have a problem paying your Debt. The Tax Department is no Different. Quite often they will simply work out a payment with you to catch up and you move on.

If you need to make a payment arrangement with the ATO, you need to get your lodgements up to date. That means that all the Activity statements (if you are a Sole Trader), PAYG payments for staff and BAS need to be lodged and continue to be lodged, even if you are in a Payment Arrangement. If you work for someone else and owe personal tax, you will need to have done done your most recent tax return and this must have been lodged with the ATO.

If you need Help budgeting for your payment plan or ongoing tax liability have a look at our Money Buckets Budgeting tool Small Business Budget with Tax.

If your debt is under $14,000 there should be no interest payable. There will be interest charged on your outstanding amount, but it will be reversed each month. That’s not to say there will be no fees charged by the ATO, there could be non lodgement fees and penalties fees. Another good reason to get your lodgements up to date.

If you are able to pay your tax debt within 2 years and your debt is under $100,000 payment arrangements can be made via an automated online system within the ATO. Your MyGov Account will be the way to communicate with the ATO. Be aware however, that if you fail to make the necessary payment or fall behind, you will need to renegotiate the debt repayment arrangement once again.

If you leave your tax debt too long the ATO can issue a garnishee notice for your bank account. The ATO can legally take money from your bank account to pay your outstanding tax debt.

The tax department could outsource your Tax Debt for Collection with a Debt Collector. They will demand payment NOW. It is always possible to make a payment arrangement, even if the Collection Agent says NO.

The ATO can also take your tax refund if you have a tax debt. If you have a tax refund from this year’s return and you owe the ATO money from previous years your refund will be taken to offset any outstanding amounts.

The ATO can also go to the relevant court and seek a court order against you for payment, this could result in a bankruptcy notice. This gives you 21 days to make an arrangement or pay in full to the ATO. If you cannot do either of these options, the ATO could file a creditors petition against you to make you bankrupt. The ATO is the major user of this facility.

The ATO can also wind up your company to seek payment of any outstanding debts. A liquidator is appointed to sell any assets to recover funds to pay your ATO debt.

On the other hand, if you wind up a company that has failed, the Companies Tax Debt will not come over to you personally.

Personal Tax Debts can be put in Part IX Debt Agreements and will generally be accepted if Lodgements are up to date. However, The ATO will take Tax refunds to pay off this Debt faster during the Debt Agreement period. It is the only creditor in a Debt Agreement to be able to do this.

It is more difficult but not impossible to put Tax Debts into an Informal Arrangement. There will be quite a lot of information required and negotiations to be done.

If you have Tax Debts either personal or from your business contact Money Buckets to discuss your options.

7. WHAT HAPPENS IF THEY REPOSSESS MY CAR

What happens when a Car or Goods are Repossessed

WHAT IS REPOSSESSION?

When you buy goods on credit, (for example a car) often the money loaned to you is secured by a mortgage over the goods. The lender takes the goods as security so the lender can take them from you and sell them if you default in paying the loan.

WHEN CAN THE LENDER REPOSSESS THE GOODS?

Goods bought on credit can only be repossessed if:

there is a mortgage or a lease; AND
you have “defaulted” on the loan agreement (for example, failed to make repayments, failed to keep the goods insured etc.); AND
you have been given a notice by the lender (required in most cases) that you are in default of the loan, have 30 days to fix the problem and you did not fix the problem within that time.

A COURT ORDER TO REPOSSESS THE GOODS IS REQUIRED IF:

The mortgaged goods are on private property and you have not agreed in writing to the lender entering that property to take the goods; and/or

Where a large part of the loan (75% or more) has been repaid and the amount now owing is less than $10,000.

CAN THE LENDER TAKE A MORTGAGE OVER MY ESSENTIAL HOUSEHOLD PROPERTY?

For loans granted after 1 July 2010, credit providers cannot take a mortgage over your essential household goods to secure the loan. Essential household goods include kitchen equipment, fridge, freezer, beds, tv, stereo, washing machine, dryer, educational equipment for children (e.g. a computer), baby equipment, and video recorder.

Property used by the mortgagor in earning income by personal exertion (tools of trade) are also unable to be used as security if they are valued below the limit in the bankruptcy regulations ($3,800 as at 29 January 2020 – for the latest amount go to the Australian Financial Security Authority (AFSA) website and select current amounts from the bankruptcy menu).

If the loan is used to purchase a particular item, for example, a computer, then the lender can take a mortgage over the item being purchased only.

WHAT TO DO WHEN YOU RECEIVE A DEFAULT NOTICE:

You need to take action as soon as you receive a default notice from the lender. The default notice will give you at least 30 days from the date of the notice to pay any arrears owing (the amount you are behind on repayments).

If you pay the arrears AND your usual repayment within the time given in the default notice (at least 30 days) then the loan returns to normal and the lender cannot take any further action. This is the best option if you can do it.

If you fail to pay the arrears in the default notice then the lender can:

accelerate the debt, which means the whole debt is owing not just the arrears; and/or
repossess the goods you mortgaged; and/or
commence court proceedings; and/or
list a default on your credit report 60 days from the date of the default (the lender usually uses the default notice to notify you that they may list a default on your credit report).

If you cannot pay the whole amount claimed in the default notice you need to:

contact the lender immediately to negotiate a repayment arrangement and explain that you are in financial hardship;
Try to get a repayment arrangement agreed before the default notice expires;
Keep paying what you can afford to pay. Contact Money Buckets for more detailed advise on how to work this amount out

If you are struggling to pay multiple Debts always give First priority to and make sure Home Loans or Rent are kept on time. Second a secured Car Loan should be kept up to date. If you only have enough income for these that’s what you pay. Cards, Personal Loans can be handled Later. You need a roof over your head and normally a vehicle to get to work or move family around. This also puts you into a better position if we need to look at Debt consolidation into a home loan, extending a Car Loan to reduce payments or a Debt Solution involving Unsecured Debts. Call Money Buckets for more detail.

IMPORTANT: If the lender agrees to a repayment arrangement then this should stop any further action. If you believe you have an agreement and the lender is threatening to repossess your goods anyway see below.

If the lender will not agree to a repayment arrangement you should then lodge a dispute in writing in an External Dispute Resolution Scheme (EDR), the Australian Financial Complaints Authority (AFCA). The lender must be a member of the AFCA scheme, which is free for yuo to use and will stop all legal action, which means that the lender cannot repossess your goods until your dispute has been considered.

REMEMBER: Lodging a disopute with AFCA should be used to negotiate a repayment arrangement with the lender where you can put the loan back in order. If you think you will not be able to catch up you need to get legal advice.

HELP, THE LENDER IS THREATENING TO REPOSSESS MY CAR!

You should follow the same steps as above but if the lender is threatening to repossess straight away (or a repo agent is looking for you) you should lodge a dispute with AFCA immediately, and park the car on private property in a garage until you have lodged your dispute with AFCA. You should still contact the lender to try and negotiate a repayment arrangement. Let the lender know you have lodged a dispute with AFCA.

HELP, THE REPO MAN IS AT THE DOOR!

The lender does not have the right to enter on private property to repossess the car/goods without your written consent or a court order. If they try to repossess explain that they cannot repossess without a court order.

If you have agreed to the repossession you should also:

take a picture of the car/goods before it is repossessed as proof of the condition of the car; and
get your personal possessions out of the car.

When the goods have been repossessed check the value. For example, in the case of a car, look in local trading newspapers to see what other cars of similar age and condition are being sold for or check online for car values.

WHAT CAN I DO AFTER MY CAR/GOODS HAVE BEEN REPOSSESSED?

The lender must serve you a written notice within 14 days of the repossession of the car/goods stating:

the date the goods were taken;
the estimated value of the goods;
the enforcement expenses incurred to date and any other enforcement expenses accruing (such as the daily storage rate for the car);
your rights; and
that the lender cannot sell the goods until 21 days after the date of the notice.

If you pay the amount of the arrears, the enforcement expenses and your normal repayment (if it is due during the notice period) the lender must return the goods to you. If the enforcement expenses claimed seem too high, check your contract and get legal advice. If you can get back on track, but cannot pay the amounts required within the 21 days, you can apply for a hardship variation. If this is the case you need to lodge a dispute with AFCA urgently. If you lodge a dispute with AFCA after the car has been repossessed but before it has been sold, the lender cannot sell the car until AFCA has considered your dispute.

SALE OF GOODS

If full payment is not made within 21 days, the lender must sell the goods as soon as possible for the best price reasonably obtainable.

Once the goods are sold, the lender must send you a notice stating:

The amount the goods sold for;
The net proceeds of the sale (being the amount the goods sold for less the lender’s expenses for arranging the sale);
The amount required to pay out the loan;
Any further recovery action to be taken by the lender against you.

WARNING: Once the goods have been sold all of the remainder of the loan that is owed becomes due to be paid immediately. The lender does not have to agree to any repayment arrangement.

But now the balance owing of the Car Repossession Debt, is an unsecured Debt and can be put into a Part IX Debt Agreement with other unsecured Debts to be voted on. We can also negotiate to have this Debt put in with the rest of the unsecured Debt in an Informal arrangement.

If you Declare Bankrupt, a Repossession Debt can be included in your Bankruptcy.

Contact Money Buckets for the best advice on how to manage your residual debt payment after repossession. We have had lots of experience with repossessions and defaults and can help manage this financial situation with you.

You can make a complain to AFCA if the lender has not sold the goods for the best price reasonably obtainable, or you believe the enforcement expenses added to the loan have not been reasonably incurred. You will need evidence to support your complaint. You will not get your sold items back!

8. WHAT HAPPENS ONCE I AM IN A DEBT AGREEMENT?

Well, life proceeds pretty much as normal without the Stress and Hassle. Your payments will continue to come out of your account and automatically stop when the agreed Debt Agreement amount is reached.

You won’t be able to borrow money for 5 years, so don’t ask, but we suggest you set up a VISA Debit card, so you can still have the convenience of a card for online bill payments or shopping, but you will be using your own money.

But there is the Odd circumstance whilst in your Debt Agreement that you should be aware of:

If you have a Home Loan and need to refinance or buy and sell again, you may be able to do so if you payout the Debt Agreement with the new Loan or Sale of the house. But it won’t be with a Bank, it will be with one of our specialist Lenders. Your Debt Agreement will preclude you from borrowing from the larger Banks as you do not meet their criteria whilst in your Part IX Debt Agreement.

If you have a Car Lease with a Balloon payment at the end, which occurs whilst your are still in your Debt Agreement you may be able to refinance the balloon payment with the Lender. This is not a guarantee, but with permission from the Trustee, good payments having been maintained on the Debt Agreement and Car Lease, some Lenders will allow this.

If your circumstances change and you earn extra money, that’s all good. You get to keep the extra money. You can pay out the Debt Agreement early if you so choose, but it is not compulsory.

Paying the Debt Agreement out early will allow Home Loans and Car Loans to be applied for from a Specialist Lender. But at this stage, we do not know of any Credit Card or Personal loan companies that will do loans until the 5 years have passed and your Debt Agreement exclusion has dropped off your credit report.

You can still travel overseas without issue so nothing changes there.

If you are a Director of a company your work life continues as normal, but be aware you must inform anyone you apply for credit with that you are in a Part IX Debt Agreement. Best and legally necessary to do that upfront as they will see it on your credit report anyway. You can then have a chance to explain your circumstances.

If you are applying for a new job or new work license, it may be a good idea to check if a clean credit file is necessary first. Especially if you work in finance or security. It pays to check and discuss this upfront with your employer, or check with your professional association.

Your Credit Report should reset a month after the 5 year period has passed, as long as you have completed all the payments. This should then give you a fresh clean start.

Remember you do not have to have a loan or card to have a good credit report, so don’t go out and get a loan just for the sake of it. Also remember that loans from Fast Money, High Interest Pay Day Lenders are virtually equivalent to having a credit Default on your credit report. If Banks or Finance companies see these on your credit report, they may not lend to you.

What if your circumstances change for the worse?

If you cannot pay a Debt Agreement payment you should contact your Administrator straight away and make arrangements to catch up at a later date. Your Administrator will work with you on this. It is vitally important that you stay in contact and be available for calls through this period as a report must be sent to all creditors on what is happening on Late Payments each 3 months. If the creditors are not happy that measures have been taken to catch up on any arrears in your Debt Agreement they can apply to terminate your Debt Agreement. All debts will be reinstated and interest can be reapplied to your balances.

If it is a permanent problem or change in your circumstances, say a pay cut or a forced ob change, your Administrator can apply to VARY the payment plan to suit your new budget. The new proposal will go to a vote of your Creditors. There will have to be a change in your Financial Circumstances to justify this and there will need to be 50% of the value of the vote agree to change it. If they vote NO you will have to maintain the previous agreed payment. If that is not possible you can also choose to terminate the Debt Agreement and Declare Bankrupt.

If you do not make a payment to your Debt Agreement for 6 months it will automatically be terminated and your Debts will return with Interest. There will also be another default put on your credit report and Creditors will resume chasing you for all your Debts.

In this case, it is generally advisable to declare Bankrupt as your Debts will start accruing Interest again.

Remember to keep in touch with your Administrator and discuss any problems you are having. If you’ve changed your bank account or moved house, or there has been a slight glitch in your circumstances, your Administrator is there to assist you. Money Buckets can advise who is best to speak to for any changes.

9. WHAT HAPPENS WHEN I AM BANKRUPT

After you have been accepted for Bankruptcy you will receive an email or letter with your Bankruptcy number and a date.

You will be automatically discharged in 3 years if you have followed your Trustees directions, replied to their requests and paid any amounts that have been proven to be owing to the Trustee.

You may then receive a letter or email from the Trustee requesting more Information. The Letter has strong wording (as it legally must) on the repercussions of not following the Trustees Directions. Don’t panic you just need to comply with the directions.

If you do not follow your Trustees directions or pay any money that might become Liable, or you to hide money or assets, or deliberately give incorrect information, the Trustee can extend your Bankruptcy until he is happy that you have complied with all legal responsibilities. This could be an additional 2 or 4 years, maybe longer.

If you have sold a property or closed down a business, or look to have other assets the Trustee may investigate further and ask for more details, Bank accounts or other information. You must provide this.

It is normal at the end of each year of the Bankruptcy to receive a request for Payslips, Group Certificates, and bank accounts to confirm what income you have received in the past year. If you earn over a certain limit you will be expected to pay 50% of the over-limit amount, after Tax.

If your income is already over the limit, the Trustee may ask you to start a payment plan, so that you don’t get caught with a large amount at once. Remember that Holiday Pay, Retrenchments, Long Service leave, and inheritance can fall in one 12month period and cause you to go over your income threshold. It is best to avoid big lump sum payments during your Bankruptcy period.

If your Car or Home has equity you may have made an offer to make a payment or payment plan to pay off the equity balance, so that you can keep your home or Car. Make sure you have a letter from the trustee that this removes any further claim on these assets.

If your home has no equity at the start of the Bankruptcy you may not be asked to make a contribution or payment initially. But be aware if the property appreciates in value over the 3-year period, especially in a property boom, you may then be asked for a Contribution based on the increase in value just before discharge. Sometimes it better to have made an agreed payment plan to the Bankrupt estate to release any claim on your home. This is not always possible, but you should be aware of what may happen.

If you need to travel overseas during your Bankruptcy period you will need to apply to AFSA and email or post in the form “Consent to travel overseas whilst Bankrupt”. You will need to pay $150 at the time we wrote this article. As long as you have followed any Instructions from your Trustee it is normally not a problem. Do this a couple of months before you leave to be on the safe side. Form available at afsa.gov.au or ring us.

If anyone checks your Credit Report, it will say exclusion due to Bankruptcy. This will generally prevent you from borrowing any money. Once you have been discharged it remains there for another 2 years and will generally prevent you from borrowing any unsecured loans or cards. However, Home Loans and Car Loans may be available from Specialist Lenders through this transition period.

You will not be able to operate a company as a Director. Think twice about getting your wife or partner to take over a company as this often leads to their Bankruptcy. You can start a business as a Sole Trader using your own name.

Your Partners credit file is not impacted by your Bankruptcy. But they generally will not be able to use your income in a loan application when they apply for a loan. So when your partner applies for a loan, it must be structured on their Expenses and Income alone. Talk to Money Buckets first.

If you have had Money Buckets assist in the Bankruptcy preparation for this, we can guide you through this period.

This advice is general advice only, it’s on common situations and questions we encounter frequently and should not be relied upon as legal advice. You should contact Money Buckets so that we can assess your situation Individually or so we can get further legal advice. This advice was prepared Aug 2019.

10. WHAT TO DO IF I LOSE MY JOB AND HAVE DEBTS

The first thing you need to do is have a good look at your ongoing situation.

Are you going to be able to obtain another Job with similar pay?

How long realistically is it going to take to get another Job?

If you are older or approaching retirement is the pension or centrelink going to be the only ongoing income?

Is doing something like Uber Driving, Air BnB or casual work possible?

Can you still survive on your partners income?

Answers to these questions will determine the approach we are likely to take going forward. If your Income is likely to be nil or very little going forward, you need to be careful what Debts you pay. Only look at paying Rent or Home Loans. Car Loans if you absolutely need the car. These affect the roof over your head and your ability to find work. Assess if you even need a car, especially if you are close to train lines, or Bus routes. See if you can get a reduced payment or payments on hold period for Home or Car Loans. Explain what has happened.

If you have Credit Cards, Personal Loans or other large Debts, you will need to call those you owe money to and apply for hardship, a payment moratorium as you will not be able to make any payments at this time. Do not agree to a payment plan with these Debts … yet. Paying these Debts will affect the ability to keep your Home and Car.

Non payment of your unsecured debts also puts you in a better position once your Income resumes, to fix outstanding all your Debts.

Once your income resumes, if you have a Home Loan we may look at consolidating your Debts into your Home Loan with a specialist Lender. If your Home Loan is late it can affect your ability to do this, or increase the Interest you may have to pay. They will look more favourably at your application if the Home Loan has been given Priority and the Car Loan as well.

If we look at a Debt Agreement or Informal arrangement, only the unsecured debts can be put into the payment plan. We then negotiate a payment plan for the Unsecured Debts. It is easier to keep to your payment plan, if you don’t already have to catch up on the Home Loan or Car Loan. Sometimes we will just have to work around this, if it all runs late, but give yourself the best chance of a quicker recovery by paying only your home loan and car loan.

Needless to say unsecured creditors can be more vocal in chasing you because they do not have anything they can repossess to offset your Debt. But you need to explain your situation and look after your families and your own welfare first and prioritise your best survival strategy.

Unsecured Debts aren’t generally passed onto a collections department when you miss one payment or pay a few days later than you should have done. While different lenders will have their own process, typically you need to have missed several payments and not responded to letters and calls before an account will be passed onto collections. Collections can sometimes be easier to deal with than the actual Lender anyway. Your Credit Report will have taken a hit by now anyway, but you may have avoided too bad of a hit if you have stayed in contact with your lender.

Explain the situation, be firm about not being able to make payments till you have an income.

Of course, not all Lenders and Collection Agents are reasonable, or offer payment plans which are sustainable. Unless you have collected all the Information, Budgeted and presented a solution which is appropriate, it’s not likely they will offer one. This is especially difficult when there are multiple debts involved. Lenders tend to be interested in themselves only. That’s why most people call Money Buckets for Help. We talk to creditors every day explaining peoples situations and seeking out the best solutions.

If you are not going to have an income again, or it is going to be substantially reduced, you may need to get your Head around some harder options.

If you are a Home Owner and at Retirement Age there may be Reverse Mortgage and Debt Negotiation options open up for you.

Resist the temptation to use your Superannuation to pay your Debts and leave nothing for you to live off in Retirement.

If you have no assets, Bankruptcy protects your Super and allows you to move on. It’s a protection for you in these circumstances, not a punishment.

You need to look hard at what position any decisions you make leave you in the Long Term. Extended repayment plans into retirement are generally not sustainable or in your best Interests. We want to ensure you have a comfortable retirement, not worrying about your finances.

So if you’ve lost your job, your situation is manageable, but there are a few steps which we can help you with to get your life back on track or moving on to the next solution.

Money Buckets is here to guide you through. We can take it slowly and make sure you understand what’s happening and give you time to assess where you and your family are at.

11. WHAT TO DO IF YOU GET A COURT JUDGEMENT OR GARNISHEE

What to do if there is a court Judgement against you for Debt

First of all, you cannot be sent to jail for not paying a debt.

The laws vary among each Australian state and territory for court judgments. This information applies to local and magistrates courts. If you are getting court notices or demands ring Money Buckets immediately – 1800 825 010

Check whether there is an actual court judgment against you and not just a threat. Normally you should receive a legal letter giving notice of the Court Case. You can appear or contact the court to fill in a Hardship request and request a payment plan. If you find this too stressful, Money Buckets can try and negotiate directly with the creditor to organise a payment plan before it goes to court, so contact us immediately you receive a Letter or notification.

A creditor may tell you they have a court judgment but if you don’t have a formal court letter you should check by calling the court and asking the following:

The amount of the judgment
The date the judgment was obtained
The name of the judgment creditor (who took the legal action and got the judgment)

What amounts can the creditor add on to a court judgment?

The creditor who has a court judgment can add the following costs to the judgment debt:

Interest. This will be either at the rate under the previous contract or at the rate set by the court.
Legal costs in getting the court judgment. This amount may be limited by the court.
Enforcement costs. These are the costs the creditor incurs in getting you to pay the debt.

Do you have a reason why you may not owe all or part of the debt?

If you believe you have a reason or argument why you do not owe any, or part, of the debt you need to get legal advice. How you move forward will depend on the type of court judgment it is.

There are two types of court judgment:

Where you lodged a defence and the court decided the matter (a judgment); or
You did not lodge a defence and the court decided the matter without you (a default judgment).

If you have a judgment against you, the only option available through the courts to change that decision is to appeal it. That means you lodge an appeal with a higher court for that decision to be reviewed. There are short time limits to lodge an appeal (usually 28 days) and you need to get legal advice urgently if this applies to you.

If you have a default judgment you may be able to set aside the judgment if you have an arguable defence (a reason you do not owe all or part of the debt). If the court believes you have an arguable defence, it may set aside the original decision and hear the matter. You need to get legal advice if you believe you have a defence.

If you do owe the money MoneyBuckets can include Court Judgments into Part IX Debt Agreements and Bankruptcies or negotiate a repayment Plan on your behalf. This will resolve the court Judgment into a Debt Solution.

If you do nothing a Creditor can:

Obtain an order from the court that compels you to provide information about your financial position by post or at court.
Requesting that the court order a repayment arrangement.
Obtaining a court order allowing the creditor to take and sell your personal property. There are rules about how and when personal property can be taken and sold. You are usually given time to make an arrangement to pay before personal property is taken.
Obtaining a court order allowing the creditor to take money from your wages or bank account. This is where they may take a large portion of your pay direct from your wage or bank accounts. This is called a Garnishee and can be crippling to your families finances. leaving you very little to live off whilst the debt is paid off. This will include any holiday pay if you resign. An employer must comply with this order or face severe penalties.
Obtaining a court order allowing the creditor to sell or “charge” real property (for example, your home).
Commencing legal proceedings to make you bankrupt if the debt (including costs and interest) is over $5000

If this is the case, your still have the option, at this stage, to put this Debt into a Part IX Debt Agreement and propose a payment plan that includes all your creditors. If the majority of creditors vote in favour of your Debt Agreement (over 50% of the Debt value), then the Creditor who has the court judgement against you has no choice but to accept the plan. They will receive payment as part of your Debt Agreement from payments you make.

You also have the choice to Declare Bankrupt, which will stop the Garnishee.

Court judgments and your credit report

Court judgments will be listed on your credit report. The court judgment will remain on your credit report for 5 years from the date of the judgment. Court judgments may make it difficult for you to get credit or you may have to pay a higher interest rate on any credit you get.

When you may not have to pay a judgment debt

If you do not have any assets other than household items, do not own any real property (for example, a home or block of land), your car is worth under $7800 and your only income is a Centrelink payment you may be protected from having to pay the judgment debt or the judgment debt may be difficult to enforce. Call us to get advice if this situation applies to you.

When your only income is Centrelink

If Centrelink payments are your only income, you are protected from any of your fortnightly payments being taken from Centrelink. However, it may be possible for accumulated savings from Centrelink payments to be taken from your account if a court order is obtained.

Judgment Debt Recovery Act Vic

In Victoria, section 12 of the Judgment Debt Recovery Act provides that an installment order will not be made if your income is only Centrelink. This means in effect that a debtor cannot be forced to pay a judgment debt if their sole source of income is Centrelink and they have no significant assets.

12. THE NEW HOME LOAN CHECKLIST TO APPLY FOR SUPER LOW RATES

Have you got what it takes to apply for the low Rates?

Tick these off if you can.

You will need to tick all the boxes in this list to negotiate the best deal. If it is going to be a joint loan, your partner will too.

☑︎ Deposit. Have you had the money in the bank for 6 months. Get the Bank account statements to prove it.

☑︎ 5% deposit may be possible but 10% is going to save you a lot on the Lenders Mortgage Insurance. 20% Deposit will get rid of Mortgage Insurance in most circumstances.

☑︎ Does your rent and savings show you have the ability to pay the loan. For instance $400 Rent + $200 a week savings show you can afford a $600 a week Home loan. Get 6 months Bank statements to prove it.

☑︎Make sure you have Internet banking that enables you to download statements and reports by date range.

☑︎Have you cut back on your living expenses in the last 3 months. Most Lenders will be looking at your bank account for your actual living costs, to see if you are able to cope with a home loan. Large amounts of spending on eating out, entertainment and Holidays may cut your borrowing capacity.

☑︎Have you paid out all your other Loans, Cards and Debts. A new home loan is going to take out quite a bit of your Budget. Best not to have other debts restricting your borrowing Power.

☑︎If refinancing or keeping a card, have your credit cards been kept under limit and all loans and bill payments right on time. Collect the last 3 months statements to prove it.

☑︎Have you been in your job for 6 months. Collect the last 3 payslips. Don’t change or resign from your job till the loan has completely settled.

☑︎If you are self employed, are the last 2 Tax returns done and looking good. We need them

☑︎Are the names on your License, Passport, Medicare Card and Birth Certificate the same and complete. Are all names there and spelt the same on each item. Are all Middle names shown. Get them fixed now. This could hold you up if you need to settle quickly.

Ticked all the boxes so Far.

Collect everything above and call 1800 825 010 for the next step.

We will run your credit report, look at your income and give you a borrowing guide.

Even get a valuation on your property you want to buy or Refinance.

Need help getting into this position, again call us 1800 825 010

13. EXPLAINER: PRIME, NEAR PRIME AND SPECIALIST HOME LOANS

Explainer: Prime, Near Prime and Specialist Home Loans

You may see these terms used in relation to Home Loans in a Non bank Lender rate chart. Some Lenders may use a series of other terms that are similar. Especially now Non Bank Lenders are offering Interest Rates as competitive as the Banks.

Prime

You may qualify for a prime home Loan when absolutely everything is in order. Credit report Good, No late Payments, No Card over limits, Substantial proof of Income, steady Job, only 1 or 2 other loans or cards from other Financial Institutions. You are in excellent Financial Health. The advertised rates will be applicable for you.

Near Prime

You may qualify for a Near Prime Loan when there may have been a minor Hiccup with your Finances. You may have a lot of Cards and Debts(That’s over 3). Maybe a little late once or twice (even if it’s only due to forgetfulness). Credit report still reasonable, no defaults. Things generally on time. Generally a little bit more expensive than the advertised low rates, but not too bad.

Specialist Home Loans

Specialist is often Broken into further stages, depending on what level of credit impairment you may have. First level you may have defaults but have paid them. You may be running a little late with payments. The Levels will increase from just discharged from Bankruptcy or Part IX to into real financial difficulty. The important thing will be, is the proposed loan going to be able to fix the problem, do the numbers add up, are you showing a history of paying what you are proposing. Interest rates are going to be double or more than a prime rate. That is still a long way cheaper than most cards, Personal Loans and any Debts incurring late fees.

The Interest rate will vary with-in each of these categories. The best rate will be the Lowest LVR. (See LVR Explainer: Loan to value Ratio) Say the Loan is under 60% of the valuation of the property, it will be the best rate. It may increase slightly for 60 to 70% LVR, may increase again for 70 to 80%, 80to 90% and increase substantially or not be available at all for higher.

Mortgage Insurance and Risk fees kick in at about 80% LVR on Prime Loans and will probably apply to all the other category of Loans regardless. Once again Mortgage Insurance and risk fees increase if the LVR goes higher.

Generally the best Home Loan rate available is a Prime loan, under 60% LVR with no Mortgage Insurance and proven steady income. For any combination of circumstances after that, the Lenders vary quite a lot, so it pays to have Money Buckets Financial Solutions search for the best deal available.

1800 825 010