by Bruce Gleeson
Over the twenty-five (25) years that I have been advising individuals who have been in some form of financial difficulty, I believe between 15-20% of those bankruptcies to which I have been appointed could have been avoided if the individual had talked about their money problems early on with a qualified professional and put in place the right strategy to deal with their debts. So what should you do if you have money problems?
Bankruptcy should always be viewed as a last resort option after consideration of other possibilities have been evaluated and are deemed not viable or achievable. Declaring voluntary bankruptcy is not an easy decision for the individual in my experience and brings with it:
- the loss of certain assets (known as divisible property);
- enables other recovery actions to be taken (primarily where assets or transactions have been entered into in order to deprive creditors of otherwise recovering monies owed to them);
- will have an impact on directorships, certain licences / registrations that are held during the course of the bankruptcy (which the standard period is 3 years) and possibly after discharge in certain circumstances; and
- will have an impact on future credit assessments (for a period of time).
The above is not meant to be a comprehensive list – but a list of some of the main impacts. A qualified professional that can carefully listen, not judge you but rather gather the right information to evaluate your options is critical to helping you through this difficult period. And the sooner you reach out and get such advice, the better your options are.
Talking about money problems for most people is difficult because it is a very sensitive and personal issue. Often it can be intertwined with:
- a business failure;
- a relationship breakdown;
- loss of a long-term job;
- a medical condition/illness – including for example a gambling addiction; or
- sometimes a combination of many of the above.
Whilst there are many great resources on-line that are a useful starting point (for example www.moneysmart.gov.au ), in my experience what is required is for someone to help take control of the situation and develop an action plan that can be followed to give the individual the best possible chance of avoiding bankruptcy. Just looking at an on-line resource will not necessarily get you there – particularly when you are already feeling overburdened.
Further, whilst initially talking about your money problems with a family member or friend is a very good start, I believe the best help they can provide is to help you find a qualified professional that can consider your position.
Reaching out as suggested above for many individuals is very difficult – and whilst doing nothing is the easier option, it will invariably end up in a worse outcome than if you make the hard decision to reach out and then get the right advice.
Everyone’s money problems are unique and there is no one size fits all strategy to with them – after all if this were the case then it would be a lot easier to deal with wouldn’t it. But this isn’t the case.
A big no no is to take advice from a friend at the pub (yes, they exist) who gives advice about transferring assets or selling assets when the individual is in financial difficulty. I have heard this excuse more than a few times.
Here are my top tips for individuals that are in trouble with debt:
1. Don’t put your head in the sand – it will only make finding a solution more difficult and increase anxiety levels. It will also limit the range of options potentially available to help you.
2. Speak to a trustworthy family member or friend who can act as a support during this difficult period. Remember a problem shared is a problem halved.
3. Write down in very simple terms what is concerning you and why. For example:
Concern: credit cards maxed out for several months
Why: calls being made to your mobile requesting payment
4. Seek out a qualified professional such as me (or my team) that provides an initial free conference so that your financial position can be properly understood, and a strategy formulated to deal with your money troubles. The team at Jones Partners understand what bankruptcy means and how it can affect your life – it is important to speak to us before simply making the decision to enter into voluntary bankruptcy.
This conference will consider things such as budgeting, prioritising creditors, considering re-finance options / debt consolidation and the like. Part of this strategy may also involve enlisting the help of other professionals.
5. Don’t forget step 4 and opinion shop to hear only what suits you. Sometimes the strategy formulated does involve difficult choices – for example do you really need 2 brand new cars with significant monthly payments??
6. Give yourself a pat on the back once you have got through steps 1-5 because you have made a significant step forward in the right direction.
7. Continue to work on the strategy formulated with your qualified professional – understanding that sometimes it will need to be adjusted along the way.
8. Be realistic, pragmatic and acknowledge that plans take time to come together.
There will be certain instances where it may not be readily possible to repay your debts and avoid voluntary bankruptcy. However, in these instances, managed with care and skill with a qualified professional you will get a fresh start upon entering into voluntary bankruptcy and an opportunity to re-build. As mentioned at the beginning of this article, voluntary bankruptcy should always be considered as a last resort option – but at times it can be the most appropriate pathway. I can help you navigate this difficult period and ensure that you get the right advice.