“It always seems impossible until it’s done”
– Nelson Mandela
Jerry’s background: Jerry had been previously been self-employed, operating a sole trader. Like many small business owners who are exceptional at what they do, he put all of his time and energy into trying to grow and operate his business. This meant that the obligations he didn’t enjoy as much, such as his finances, fell by the wayside. This included the reporting and payment of his tax obligations to the ATO.
Jerry knew that he would probably owe tax, but he also strapped for cash. When it came to lodge his income tax returns and Business Activity Statements, he continued to operate without lodging.
The debt: Jerry’s business had been gradually declining over time. After years of trying to generate a steady income, he decided that a steady pay cheque was the only way forward. Jerry benched the business and returned to work under an employer.
He also lodged all of his outstanding tax returns, and was issued with a huge tax bill of $100,000. This was in addition to his existing debts, which included:
- $20,000 in unsecured debt (consisting of a credit card and personal loan), and
- A car loan with a balance owing of $40,000.

The payment agreement: Jerry tried to negotiate with the ATO to pay his debt in instalments, but the best he could negotiate was a maximum instalment plan spanning 24 months.
While Jerry was on a taxable income of $80,000 per annum, the monthly repayments proposed by the tax office exceeded $4,000. This was almost 80% of Jerry’s after-tax income per month.
Despite this, Jerry tried his best to make these payments. Very quickly, however, it became impossible to sustain in addition to rent, car loan payments, credit card payments and his remaining living expenses.
Jerry defaulted on his arrangement with the ATO.
The request for help: During the months following the ATO’s demands for payment, Jerry approached 3 separate banks for help.
The first bank told Jerry that they were unable to lend for tax debt.
The second bank told Jerry that they were only able to lend if he owned a property with sufficient equity, which he did not.
The third bank told Jerry that they couldn’t assist him for the same reasons as banks one and two, but also because he now had multiple credit applications listed on his credit file.
The potential alternatives: Jerry didn’t really have any assets to sell – the car was subject to a car loan, so selling that wouldn’t generate any money to pay to the ATO. If anything, it would probably leave him with remaining debt and no car.
He faced a similar situation with his household items. Selling the furniture and basic contents he did have would:
- Fail to raise anywhere near enough money to fix the tax debt, and
- Leave him without necessary household items that would eventually need to be replaced (and probably at a greater cost).
The decision to file for bankruptcy: After careful consideration, Jerry decided to file for bankruptcy.