“Problem solving has five consecutive stages:
Realisation, Identification, Comprehension, Formalisation and Implementation”

– Rohan Lamprecht

Stacey’s background: Stacey had been gainfully employed for her entire career. She had a number of credit cards, which gradually saw her debt increase to around $10,000. She had also been in a long-distance relationship for some time and, after much soul-searching, decided that she would give up her job and move interstate to be with her partner, Trent.

The debt: Stacey took out an unsecured personal loan of approximately $40,000. This enabled her to consolidate her credit card debts, as well as purchase a new car. The remainder of the money was used to relocate.

With such a strong work history, Stacey thought that she would find a job quickly. However, she quickly found that there wasn’t much available in her field in Western Australia. For those jobs that were available, there was fierce competition.

Although Stacey managed to find temporary work in bars, the income was so unsteady that she had to rely on her available credit card limits to cover her expenses. Trent helped out as much as he could, but he had his own expenses and debt to cover.

The request for help: Stacey recognised that she was in financial trouble and obtained hardship relief from her creditors. But after 6 months of irregular income, she ended up defaulting on her loan.

Finally, Stacey found a fulltime job. However her new income was significantly less than what she was earning before. She also had the added complication of dealing with debt collectors after her original loan provider sold the loan debt. The debt collector was demanding payment in full.

She thought about selling the car to pay off the debt, seeking advice from a dealership. They estimated she would receive around $18,000 if she sold it, which wasn’t enough to cover her debt. It would also leave her without transport.

Stacey tried to negotiate with the debt collectors, but their demands were unreasonable. When she couldn’t meet them, the collectors threatened to take further action. This included placing a garnishee on her wages and issuing a writ for her car.

The decision to file for bankruptcy: By this stage, Stacey’s debt had ballooned to almost $60,000. It was overwhelming – she couldn’t sleep, no longer felt comfortable leaving the house, and started experiencing anxiety and panic attacks. After careful consideration, she filed for bankruptcy.

How bankruptcy helped Stacey move forward

  • Stacey immediately stopped paying her $60,000 of unsecured debt
  • Due to the protection of The Bankruptcy Act, the debt collector was unable to garnish her wages or sell her car
  • Stacey’s credit report was impaired for 5 years. However considering that she also had a default which would last for 5 years, she didn’t feel this made any difference to her immediate ability to borrow
  • Stacey was also able to keep her entire income. As she was earning around $65,000 gross taxable per annum, she didn’t have to make any payments under the Bankruptcy Act.
  • Stacey was able to keep her assets like furniture and super, as they were all protected in bankruptcy
  • Stacey was able to negotiate payments to keep her car, despite it being valued above the threshold limit. Her car was valued at $18,000 by the trustee; the threshold was $7,700, which meant that an excess amount of $10,300 vested in her bankruptcy trustee. She really wanted to keep the vehicle, so Trent made an offer to purchase the trustee’s interest for $10,300. In this instance, the trustee allowed Trent to pay the excess over 12 months in regular installments. The offer was paid off as agreed. This resulted in the car being protected from her bankrupt estate
  • Stacey was able to focus on building a new life, debt-free, with Trent
  • She was able to answer the phone again without anxiety, her panic attacks ceased and she began to build a new social network