The Bankruptcy Handbook

I've been meaning to tell you about this fantastic little book. It describes all the aspects of bankruptcy law in simple terms. It's Australian and it's fairly recent (2007). Since it's publication there has been some amendments to the law but you can read about those in my previous blog here.

Better yet, there is a google preview available here so you don't even have to purchase it to get the bulk of the value from it. 

Hope it's as useful for you as it has been for me.

ABC Radio: Failure is an option.

I heard this on the radio this morning and I think it's fantastic!!

We all love to win and fear failure but is this the right way to think about it?

Join a panel of guests, including the author Terry Robson, who puts the case for taking a positive view of failure as a necessary tool on the path to success. Easy to say, hard to do.

Click here to listen 

About the book

Life goes on...

I’ve been putting this out of my mind for weeks now, not sure if it’s avoidance or I’m actually getting over it. It’s getting easier to forget that I am bankrupt but the fact that I am still technically unemployed and living with my parents is more apparent. I think if I had a job and a place of my own I would hardly even notice at all. I’m dying to see if the Trustee will let me go overseas and visit my sister. I want to go to New York with my mum next year as well. I’ll have to save my arse off to do it but I am determined.

How long has it been now? It’s 15 weeks today, just over three months. It all feels like a bad dream. Another life I left behind. I struggle to recall the anxiety and guilt I was feeling mere weeks ago. Instead I can see that I did the right thing. Absolutely, the right thing. Just like leaving a bad relationship or breaking a bad habit, it feels so wrong in the moment, it feels like you’ll never know a time when it isn’t effecting every minute of your day, taking up all your energy and crowding your brain with thoughts and feelings. But here I am, 15 weeks later and I feel so calm and so remote from that horrible mess.

Even the aftermath, the wrench of giving up everything I valued, has lost its sting.

The quality of life I am enjoying now is such a surprise. Just to sit in the sun with a cup of tea and not have my mind wander into an anxiety minefield. Nothing else compares.

Still, I might buy a lotto ticket this weekend.

Why did the bank keep offering me more credit?

Look, I can’t stand it when people don’t take responsibility for their own mistakes. Like when people sue a pub for allowing them to drink and drive. I understand that the publican has a responsibility but, seriously, you made a choice and it was the wrong one. You may have a weakness for alcohol but I don’t think anyone could claim to be a compulsive drink driver.

However, I think there is a valid argument that banks prey upon people with limited financial skills and lure them into a debt cycle. It makes sense really because in the end you’re usually barely capable of covering the interest payments which is where the bank makes it profits anyway. Plus it’s listed as an asset on their balance sheet and they can borrow against it. Money for jam!

Consider this. I started with a credit card with a limit of $2,000 in 1995. By the time I went bankrupt that very same credit card had a limit of $25,000 and the lending bank had also given me $30,000 in unsecured loans as well, even though I had been unable to make payments on several occasions. I had disclosed my annual taxable income on each occasion and it was clear that there was no way I could service this level of debt – so why did the bank keep extending my liability?

On August 6, The Australia Institute released the results of a study into Australian banks and found that they are “aggressively encouraging” customers to take on more debt regardless whether they can pay it back or not:

“Two in three respondents (66 per cent) reported receiving an unsolicited offer for a new credit card in the past 12 months, while one in two (49 per cent) had received an unsolicited offer to increase their credit card limit. One in three (36 per cent) had received an offer for a personal loan, and one in five (18 per cent) had an offer to increase the available credit on their home loan.”

Furthermore, having a regular income was no barrier to receiving offers of credit:

“…a majority of respondents who were not in paid employment together with a majority of those living in households with a combined income of less than $40,000, had received an offer for a new credit card in the previous 12 months.”

Again, I understand that receiving an offer to increase the limit on your credit card doesn’t compel you to do so but if you are in desperate need of cash you can always make yourself believe that you will have the capability to pay it back in the future – particularly when you are in business. Things are always just about to get better, if you could just relieve the cash flow and get things moving again! A letter in the post offering you a few extra grand seems like a gift from heaven when you have suppliers holding your stock and a landlord threatening legal action.

I’m glad it’s over. I never want to be offered credit again, I hate the fact that I was vulnerable to their manipulations and I’m glad I’ve been struck off their radar. I hope that other people can see through the banks and get out earlier; or make a change before they have no option but to hit the reset button like me.

If you're interested you can read the full report here:

Money and Power: The case for better regulation in banking
August 6, 2010 Josh Fear, Dr Richard Denniss, David Richardson

Hello? Ms Bankrupted, are you still there?

Yes, I'm still here. Only 1010 days to go. I can’t believe I haven’t posted for a whole week! I wish I could say that my life is not affected by my bankruptcy anymore and that I am moving on and getting over the whole thing but that’s not really true. I’ve just survived a whole week with absolutely no money in my pocket. Have you ever tried to go a whole week without spending any money except for absolute essentials? I have transport, meals and rent covered but I’ve had to come up with some creative ideas for parking in the city and explaining to a 6 year old that she will have to wait another week for her birthday present. Being bankrupt doesn’t necessarily equate to being cash strapped but until I get a higher paying job my situation will not improve. It is still far better than before, I just don’t have a credit card to distort the reality.

So a quick update on previous blogs:

No response from the selection panel that rejected my job application. I really wasn’t expecting to hear from them, they’d be too busy getting on with the job of employing someone. Would love to know what was so repulsive about my application that they were able to reject me in just four days.

No response from the Trustee, in spite of her promises to get back to me last week. Not really bothered, I think I was just having an anxiety attack. What difference does it make, really?

AND I presented my first Uni assignment yesterday. I think I did pretty well! It was so satisfying to research something entirely new and present it as an expert. I’ve been feeling so down on myself eg. “What would I know, I’m a bankrupt.” Well, it turns out, quite a lot actually, with the capacity to learn even more.

Life goes on, the detritus swells to fill the gaping space that remains after everything, both good and bad, is taken away. It’s up to me to cordon it against the things I don’t want and nurture the things I do, like this blog – thank goodness, it’s free!

Patience is a virtue - whatever!

I’m so anxious today. I haven’t heard anything from my Trustee for ages and I’m dying to know if all my intellectual property has been appropriated by my ex-business-partner. I’ve resigned myself to the idea that I have absolutely no rights to any information regarding my estate. It seems that it is quite simply not mine any more so I have no right to ask about it. But I want to know!

I’ve sent an email to the Trustee requesting some information. Hopefully she will give me a call. This is what I wrote:

“Sorry to bother you but I haven’t heard anything and wondered what had happened. I don’t know what information I am entitled to know but I would really appreciate knowing the outcome of the liquidation of the partnership.

Actually, I would really like to understand the whole process, what is happening to my creditors and what investigations might be done into the companies of which I am a shareholder? Am I allowed to ask about this stuff? I know it will have no bearing on the outcome but I just have a macabre desire to know what has happened so far and what I can expect in the future.”

In exactly two weeks, it will be 3 months since my bankruptcy became official and as far as I can tell nothing is resolved really. I suppose my situation is pretty complex, what with all the companies, partnership and informal creditors. I wonder if I get a statement of some sort at the end? I can’t find any information online about what information is provided for the Bankrupt throughout the process.

Postcript: Just heard back from the Trustee and she has been very busy on another case (keep forgetting how many people are in the same overcrowded life-raft as me) and she will follow up and get back to me this week. She also said:

“I can advise that nothing has been submitted from your former business partner's solicitor. You are certainly entitled to information with regards to the investigations of your estate. I will follow up with the other side this week and let you know how I get on. In the meantime, please do not hesitate to contact me should you have any queries I can help you with.”

Feeling a bit better. At least I know I’m allowed to ask.

I might be crazy but I'd rather be bankrupt.

It’s so easy to get disillusioned with life and give in to feeling down and out when you’re bankrupt. I try to stay positive and be constructive with the things I’m learning about myself but there are some days when you just want to wallow in it. I could so easily go that way today.

My job application was rejected. It only took four days for it to be rejected which suggests that I was eliminated in the first round. I’m going to ring up today and see whether I can get some feedback but I know I’ll get the standard response: “The quality of applicants was extremely high and based on the selection criteria you just missed out.” I know it, because I’ve given that response a million times myself.

Bugger!

I could so easily get back under the doona today and sink into a lowdown, slow-burn, all day funk. Luckily, I have to go to work and be productive. If I wasn’t working for my Dad I’d probably call in sick.

I’ve had some dark days though. Three years ago I got quite unwell. I wasn’t sleeping and would stay up all night just randomly Googling and watching YouTube clips. I remember I watched a whole movie in three minute clips, it was “Say Anything” with John Cusack; I replayed the final kissing scene about 50 billion times. I just couldn’t sleep, I was so anxious. During the day I would avoid people, I didn’t want to speak with anyone, which wasn’t great for business. I stopped showering, I didn’t even get out of bed on the weekend, I’d just lie around in the same clothes day after day watching crap TV and eating bad food. No one had any idea how bad I was - I just wanted to hurry up and die. I think the lowest point was when I locked the doors and stopped answering the phone at work. I knew that I was putting everything at risk if I didn’t get my act together but I think I also knew that my business was going down the gurgler anyway and I didn’t know what to do next.

So I went to my GP and got some medication, and I rang Lifeline and spoke with a Counselor. The Counselor asked me to consider what might happen if the business failed. It’s funny to think back now because I firmly responded that my life would be over if that happened. I truly believed that failing was not an option and that somehow my life would come to an end if it did. It’s frightening to think how powerfully I believed that. My perception of the situation was so warped. When I confided in people they would say to me: “But you are not the business, you are a person.” But I really couldn’t distinguish myself as separate; the failure of the business meant the end of me. I still can’t quite fathom how I am still here – and flourishing!

I’ve been scouring the internet and also the enormous library I have at my disposal (gotta love being a post-grad research student!) and I cannot find much about the link between mental health and bankruptcy. Anecdotally, I know that financial hardship can be both a stressor and a symptom of mental health problems. Personally, I think that business failure is incredibly stressful; who knew there were so many shades of guilt, remorse, anger and despair?

If you are experiencing any of the above: talk to someone – anyone at all. Contact Lifeline or see your GP. And please trust me, you will, at the very least, survive this. I did.

Bohemian Bankruptcy (a tragedy) by Drag Queen

Just for fun (and because I'm having a day off!)

New bankruptcy legislation in Australia

Becoming bankrupt is like buying a car or trying to get pregnant – everywhere you go you see 1993 SAAB convertibles or babies. Whenever I hear or see the word “bankrupt”, my ears prick up. So the recent changes in bankruptcy laws in Australia caught my attention and I thought I’d mention it in case anyone missed it. Keep in mind that this is the amateur ramblings of someone with no financial qualifications and I’m happy to be corrected if I’ve misinterpreted anything so post a comment or send me an email.

The Bill to amend the bankruptcy laws was introduced to the House of Representatives back in October 2009 and was passed by both houses on 24 June 2010. The aim of the amendments is to “modernise the national personal insolvency scheme and to make it more efficient.” This suggests that the nature of bankruptcy has changed and the law has had to change with it.

The most tangible change is that a creditor cannot force you into bankruptcy for a debt less than $10,000. This makes sense to me as I was easily able to access unsecured credit up to $50,000 which was less than my annual income at the time. Whilst my debts were business related, most people I know have easy access to at least $10,000 in retail credit and credit cards even if their income is quite low. Previously, a creditor could force you into bankruptcy for a $2,000 debt! Mind you, you can still enter into voluntary bankruptcy for less than $10,000 if you can prove that you are insolvent but you would probably be better to enter into a Part IX Debt Agreement instead.

Which brings me to another significant amendment included in the Bill. The income threshold for Part IX Debt Agreements has been increased by 20% and the threshold for debt eligibility has also been raised which I think is great news. Not applicable to me, of course, my debts were off the scale but hopefully a second chance for anyone looking down the barrel of bankruptcy. Part IX Debt Agreements really are the cat’s pyjamas from a creditor and a debtor point of view. The creditor gets more of their money back and the debtor avoids the stigma of being a bankrupt. According to the figures cited by ITSA, Debt Agreements are on the rise and I think many people could relate to this trend. Considering the increase in the average income in Australia (and the crazy amount of credit available during the boom) this amendment would provide welcome relief for many Australians.

Another amendment to the law is the extension of the stay period between when a debtor files their intention to declare bankruptcy and when the creditor can take action. Previously, a debtor only had seven days, this has been extended to 28 days. During the stay period you suspend all your payments and the creditor cannot harass you so you can take a breath and try to figure out what the hell you are going to do.

Some of the other amendments to the laws are:

• Increased powers of the Trustee to investigate the Debtors Statement of Affairs – so don’t try to hide anything!
• More transparency in the fee structure of the Trustee – this will be particularly helpful when dealing with the more aggressive financial crisis consultants.
• Provisions relating to offences so that people declaring bankruptcy due to illegal activity are dealt with effectively – if you haven’t done anything illegal then this shouldn’t be a problem and, if you have, then more fool you.

Personally, I appreciate the intentions of the amendments and I think that they will go some way to assisting those people who find themselves out of their depth and genuinely need help to dig themselves out.

If you want to read more about the amendments, here are a few links to the Minister’s speech, a professional review by the Insolvency Practitioners Association of Australia and also the legislation itself.

A matter of perspective.

Big day, yesterday. Submitted an application for a job and started Uni. My transformation has begun!

Three years seems so long (still 2 years and 10 months to go!!!) but I don’t really feel all that restricted by my bankruptcy. I feel the release from debt more powerfully than I do the loss of my assets. I didn’t really own anything anyway. Stripping my life back to the bare essentials has been cleansing and liberating. I often try to imagine how this would feel for someone falling from a much more exalted position. Imagine if I had a child or an executive position, if I had lost my home and had to move my family, imagine if my kids had to change schools. There is a great deal of social pressure to maintain a prescribed lifestyle and it would be very hard to do that on a net salary of $44k.

Ironically, I fall so far outside the eligible criteria for the mainstream definition of success, I am consequently free from the tyranny of comparison. I am a single woman nearing 40 without children and, where there is no hope, there is also no expectation - so I can do whatever I damn well please! I can buy my clothes from Op Shops, I can live on vegemite toast, I can use a bicycle as a primary means of transport and I can live with my parents. None of that seems particularly outrageous for a person in my situation.

Becoming a student again is invigorating (and by happy coincidence authenticates my tree-hugging, anti-consumerist disguise); the classroom is a place where ideas are currency and money is a secondary consideration to the creative process.

If only the real world was more like that!

I'd recommend returning to study for any bankrupt, especially if you can get Commonwealth Assistance. It's such a great opportunity to expand your social and professional network, increase your skills and just break your current mindset by doing something constructive and positive. And, the best part, I'm completing my course part-time over a three year period and this somehow makes me feel less overwhelmed by my bankruptcy term. I can persuade myself that my bankruptcy is less of a setback and more an opportunity to stop and garner more inspiration and knowledge for the next stage in my career.

See? It really is all about perspective.

Bankruptcy 101: Valuable business education?

I’ve just sent off another job application. I have a good feeling about this one. I had to write a comprehensive response to the Selection Criteria outlined in the Job Description and it was really quite easy to provide examples of relevant previous experience. It made me think about the value of experiencing business failure and the practical “real world” knowledge I’ve gained from going through the process of bankruptcy. I obviously couldn’t include my new-found business intelligence as part of my application but it really is highly under-rated.

Actually running a business, no matter the outcome, is a unique experience that cannot truly be related to another person. A great mentor of mine once told me that I was successful in business because I was in business and that is the hardest part – getting started. It sounds like a riddle but I believe that the opposite is also true. I believe the best business decision I ever made was to end my involvement on my terms when I could see that the business simply was no longer viable. It doesn’t really matter what took place before that moment because I took the correct action, I’m sure of it.

Being able to recognise a fantastic business opportunity is a valuable skill and can prove lucrative for many people. However, I believe it is far more valuable to be able to identify risk and be realistic about the future of a business idea and then have the nouse to reject it or fold it based on evidence rather than emotion.

If I ever return to business again, I know I will be successful next time. All the lessons I’ve learnt have been tangible and have made an indelible imprint on my business brain. It all makes sense from the other side. Approaching a business from a theoretical viewpoint, which is all you can do in the planning stages of your first business, is fraught with danger. You are actually stumbling blindly along a path dimly lit by “projections” and strategies. It is impossible to measure anything until you have completed at least one business cycle, whatever that cycle may be, and then you need to have enough cash to keep going to see if you can either replicate or improve that cycle. No matter how thorough your preparation there is no avoiding this fact.

This appears to confirm my mentor’s theory that just getting started is the key. However, I would append that with: after starting, creating a sustained cash-flow is the real challenge. Pretty obvious you’d think but you’d be surprised how many people keep flogging that dead horse hoping for a miracle. Investing good money after bad; trying to overcome the oversights of start-up blindness. That’s not to say it can’t be done, surviving the first year is a major feat for any business, surviving the second is even harder, but you need to have plenty of cash ballast to punch through the swell or you can get lost at sea pretty quickly, I know I did.

What is this strange feeling inside?

Wow. I just had a small burst of what I think I may have identified as happiness! I just feel so good today and I never stop to acknowledge it when it happens. Who woulda thunk that you can feel happy while you’re bankrupt?

It’s been nearly a month since I started this blog and I promised at the beginning that I would take you along on the journey to rebuild my life and my finances. So far, I’ve bleated on about the many negative aspects of declaring bankruptcy and how bad I’ve been feeling so I think it’s time I focused on some of the positive things I am achieving in the mean time.

I’ve enrolled to study. I discovered that I can do a Masters degree part-time while I work and all the fees are paid via the Australian Commonwealth Assistance Program so I haven’t had to pay any fees upfront! I’m really excited about this as it will help me to reconnect with industry and bring me up to date on the technological changes that have been occurring in my chosen field whilst I was working in small business. It also means new friends, a new start and a new challenge!

I’m applying for jobs. Can’t wait to see what I might end up doing and can’t wait to have an income again and start SAVING after all this time on the debt merry-go-round. Even the prospect of moving out of Mum and Dad’s seems a little less daunting these days. I know my financial confidence will return when I need it.

I’m being creative. Writing this blog; working on my book; writing songs and doing a few freelance design jobs around the place. All these little projects give me the satisfaction of seeing something positive grow from all this negativity; a little tomato plant beginning to shoot from a pile of crap.

I’m getting fit and healthy. I think I’m in the best physical shape I’ve been in for about 10 years and I feel fantastic. I’m eating lots of healthy, nutritious food – and eating regularly. Sleeping really well, too, and that’s pure heaven, I hadn’t had an un-induced good night of sleep for years.

I’m socializing with lots of new and interesting people. I’ve been out every night this week, and even had to cancel a double booking! None of it expensive; just visiting with people, maybe a bottle of wine, great conversation and a good laugh. I’ve had a few visitors from interstate and it’s been wonderful to introduce them to my family after all this time.

I’m spending time with my family. I've been extracting lots of love and cuddles from my nieces and nephews, sometimes against their will but they're getting used to being mauled by their affection deficient Aunty. Just being in touch with my family’s everyday life again is so comforting, dropping in, organizing stuff, being involved.

I have a car. My awesome parents have acquired a third car so I now have my own wheels to get around. Can you believe it? It’s made such a huge difference for me to have that independence and get out and about. Lucky, Girl!

This is good. I’m going to favourite this page so I can come back and read it if I have a bad day.

Anxious rambling...

Got a bit of free floating anxiety today. I haven’t heard anything from my Trustee for over a week and that’s making me nervous for some reason.

I guess a contributing factor might be that my ex sister in law is giving me a hard time on Facebook. I’m wondering if I should un-friend her. She keeps posting snide remarks on my photos. Things like: “Looks like you’re having loads of fun… lucky u…”

What am I supposed to do?

Unfortunately, I can see her point. Her brother is the ex partner from my very first post. That is to say he is the beginning, middle and end of all my financial woes. His failed business idea was the beneficiary of the loans that crippled me and forced me to declare bankruptcy in the first place. Unfortunate for me, unfortunate for his sister; he also persuaded her and her husband to mortgage their house for his stupid business idea. My ex is supposed to be making the mortgage payments but he keeps missing them and blaming me because I’ve run off and left him to manage everything.

The biggest problem is that I do feel incredibly guilty about my bankruptcy. It wouldn’t be so bad except that I know the other creditors personally. I couldn’t give two nits about the banks, they still made a profit from me with interest and fees, but these are people have put in money they earned themselves, they have real assets on the line, their homes and retirement money. How can I justify abandoning them?

I just don’t want to deal with it anymore. I just want to leave it in the past and forget it ever happened. Surely bankruptcy is the ultimate financial sacrifice? Surely that exonerates me from any further responsibility? That’s what it is for! So why do I feel so bad then?

Girl, you gotta bad attitude!

I have to change my attitude to money. I just feel as though I’m in free fall all the time. Even under these strict circumstances, there is never enough. Breathing seems to accrue a fee these days.

I’m freaking out because I just got a lawyer’s bill for $2000. And an ambulance bill for $812. The first was entirely avoidable and a complete waste of money. The second was obviously unavoidable and luckily I have insurance but I took way too long to send the claim form off and now the ambulance people have handed it on to a collection agency. I thought those days were over! Not a very good start.

Why do I do that?

I don’t like paper. Put it online and let me pay EFT and it’s done in a flash but make me fill out a form and put it in an envelope and find a stamp and then find a post box and then file the piece of paper, wait for a cheque to come back, retrieve said paper, put it in an envelope and find a stamp and go back to the post box… oh my god, yawn.

Bad attitude! I need to be the anal, obsessive compulsive type that receives it one day, sends it the next. Must develop some fear around consequences. It’s just that once you’ve been over the edge you know exactly where the tipping point is and it’s a long way from a letter from a collection agency. I pushed every boundary that existed and then finally I was the one that pulled the plug. Right up until the day I declared bankruptcy, my credit rating was great. Even though I usually got at least one phone call a month from the bank to remind me to make my payments, the only place that was recorded was at that bank. The really scary thing is that the same banks would send me periodic letters offering me automatic increases on my credit limit, even though I was obviously a bad payer! That’s a whole other blogspot, though.

Maybe I just don’t like money. It’s just an annoying administrative duty you have to undertake. I want to get on with living and not think about it. Having an administrator is great but these two bills I’ve had to take care of myself because they are outside my usual budget. I can’t believe how much it has stressed me out.

I just read that last paragraph. Not like money? No wonder I have problems. Grow up!

Going home.

So, living with my parents again. It’s been four and a half months now and I have to confess that I am really enjoying it. Oh dear.

I moved out of home at the tender age of 17 to live with loser boyfriend number one. All my siblings did the same (moved out, that is, they were too smart for loser boyfriends). I’m the only one to go back.

Seinfeld sums it up perfectly…



The things I like about being home with Mum and Dad:

1. Having people to prepare and eat a meal with
2. Coming home to a house with other people in it
3. Being missed when I don’t come home
4. Spending time with my parents
5. Not having to do grocery shopping (hate it so much!)
6. Not having to cook (not a big fan of that either)
7. Actually having enough washing to do full loads of whites and towels
8. Having a routine
9. Eating fruit and vegetables
10. My Dad waking me up in the morning instead of an anxiety-inducing alarm clock
11. Long, hot showers
12. Significantly reduced chances of having fatal shower accident and not being found for three days

I don’t even care when I tell people now. I’m 37, single with no kids and after growing up in a large family I don’t really like living on my own. I’m certainly not in a position to share with anyone else right now. I don’t even know anyone in a position to share with me anyway. I know I won’t live with Mum and Dad forever but, right now, it is definitely where I belong. I’m aware of how lucky I am to have this option, I know plenty of people who wouldn’t be welcome at home after buggering up as badly as I have. My parents have never given me one moment of retribution or judgment for my sins, they have supported me 100% and continue to do so.

I’d like to see the Trustee try to put a value on that.

Life without credit, so far.

Have you ever considered a life without credit. Okay, not everyone gets a mortgage and you might be sensible and actually save to buy a car or have a holiday with cash. But think about all the times you use your credit card. Every time you do use it, ask yourself if you could use cash in that particular situation and why you are using credit instead.

It’s just so bloody convenient that’s why!

I know I’ll feel the loss of a credit rating a hell of a lot more when I finally move out of Mum and Dad’s place. I’m not sure about the phone and electricity but it appears that I may have to pay at least part of my bills upfront or subscribe to a direct debit system which means I’ll have to be damn sure I have the money in the bank. That’s the thing about having no credit, when you reach the end of your pay period, there is nowhere to go. Having credit, especially credit cards, gives your budget some comforting elasticity. Even the best budgeter has cash-flow problems occasionally and a credit card can see you through a long month or a planned expense that arrives a little early. I don’t have that luxury any more.

I was surprised how much I’ve missed my credit card. I’d had it since I was 21, I knew the number off by heart, but I didn’t think I was dependent on it. I’ve really missed it, though.

My biggest beef is how limited I am in purchasing anything over the phone or on the internet. Concert and theatre tickets are the worst. I have to ask my mum if I can use her credit card and then pay her cash. I’m not whining about it, my mum is an angel for letting me do it (would you give a bankrupt your credit card number?). But otherwise I would have to take time off work to go and stand in line for hours to buy tickets with cash – do people still do that?

I was delighted to find that PayPal does not require a credit card to set up an account, you can set one up with an ordinary savings or cheque account but that’s really only any good for eBay. Amazon and iTunes don’t accept PayPal, you must have a credit card to purchase from both of those sites.

I suppose I could get a Visa Debit Card but they cost $5 a month in fees and when you’re only getting $70 a week for incidentals, five bucks seems like a lot.

What I didn’t know: There are accounts at the bank that have NO FEES AT ALL. I went to the bank to set up some extra accounts for my direct debits for insurance etc. I confessed to the consultant that I was bankrupt and was having all my accounts managed by MyBudget. She changed my everyday account to a type of “pensioner” account meant for people receiving Centrelink payments. She even gave me a piggy bank! Ironically, this was one of the banks I defaulted on.

It’s not so bad. Actually, it’s forcing me to plan better and making me aware of how reliant I was on credit cards. I know this sounds crazy but I am actually quite good with money. No, stop laughing, really. Alright, maybe I thought I was quite good with money. My current situation is a bit like being on a very strict diet. You never realized how many calories you were consuming and how big your servings were until you started practicing portion control. No wonder those stretchy credit cards were so comfy!

Friends - who do you tell?

I’ve just come home from dinner with old friends from my University days. It was excruciating to try and talk about my life without telling them that I’m bankrupt. This is becoming a recurring theme. I don’t know if it’s because I’ve returned home after such a long absence and so I’m reconnecting with people from the past or I’m reaching a significant time in my life (eg. 20 yr High School reunion) but I keep finding myself in situations where I need to explain what I’ve been doing for the past little while. Or maybe I’m just more conscious of it.

My point is that I feel such a fraud. My friend was asking lots of difficult questions about my situation. What was I going to do? Was I looking for a job? The worst part is that they all assume that I sold my business for a princely sum and I’m now considering my options from a sound financial position. I faltered, I admit it, I couldn’t bring myself to disabuse this idea. It seemed so appealing to think that I really was that clever, that successful. But now I feel like I lied by omission. I simply didn’t deny it. What have I done? God help me if anyone ever discovered this blog. But it begs the question: are you being deceitful if you don’t tell your friends that you’re bankrupt?

When you become bankrupt, your bankruptcy, and information about your estate, are entered into the public domain. Anyone can access that information, for a fee. It’s unlikely anyone would go looking for it unless they were planning to do business with you, or were perhaps of malicious intent. I’ve moved a considerable distance to get away from anyone that might have malicious intent. Thankfully I made all my mistakes very far from home so I have the luxury of returning to a place where no-one knows. But there are so many questions about where I’ve been and what I’ve done and it’s really hard to not tell them about the most significant thing that‘s happened to me in the last 10 years.

So who do you tell? Well, I’ve told:

My parents, my siblings and their spouses, my closest friends, my former boss and another professional mentor. A total of fourteen people. I imagine that some of those people have told other people that I don’t know, just for news value, but I trust most of them to be discreet and certainly never to tell anyone detrimental. Trust is really the key here. I don’t mind people knowing, in fact it’s something of a relief to not have to hide it but I do worry about it being used against me somehow.

The thing is that all of the creditors know, and some of them are people who knew me personally. There are also creditors who have connections in my professional network. All of these people are mightily pissed off and would love to do my reputation as much harm as possible. I confess that I would feel exactly the same way if I was them. I’m pretty paranoid about how far they might go to discredit me.

I guess I’m just waiting for the day that I’m publicly humiliated in front of all of my peers. So, perhaps I can allow myself the small indulgence of maintaining the ignorance of my wider circle as long as possible.

High School Reunion

The irony is killing me. Following on from my previous post, things just reached a new low. I just received an invitation to my 20 year High School reunion. I can only laugh in the hope that it prevents me from crying/murdering someone. How could I forget that it’s been 20 years since I left high school this year?

I’ve been frantically googling and facebooking anyone from school whose full name I can remember. They all appear to fall into two categories:

1. Happily married with 2.6 kids, mainly posting about acquiring new cars and couches, family holidays and their spouses career advances.

2. Working for Nike or an international bank and posting photos of their weekend in Tokyo, where they won a marathon by the way, or their second attempt at Everest (oh my god, you didn’t get up the first time?!).

Everybody dreams about going to their high school reunion, entering triumphant, reveling in the success they’ve made of their lives. I didn’t have a particularly bad time at high school, I quite enjoyed it actually. I wasn’t bullied or ostracised, I had a great group of friends and reasonable self confidence so I don’t have any particular axe to grind. But your 20 year high school reunion is a milestone, a point in time when you stop to consider all that you have achieved since graduation.

I’m imagining the conversation I will have to have over, and over, and over again:

High School Judge & Jury:	So, Girl Bankrupted! Wow! What have you been up to since high school?
Me:	We-ell… got married…
HSJ&J:	That’s great! Congratulations!
Me:	… and divorced.
HSJ&J:	Oh. Whoops, sorry! Ah well, you wouldn’t be the only one… hahaha… any kids?
Me:	No.
HSJ&J:	Awww, well, there’s still time – are you seeing anyone?
Me:	No, no, it’s just me.
HSJ&J:	Lucky! I know sometimes I would just LOVE five minutes to myself, what with the kids and my high paying yet surprisingly easy and incredibly fabulous job/business! Where are you living now?
Me:	I’m living with my parents at the moment.
HSJ&J:	Oh, yes, we had to do that last time we renovated, what a hassle! Are you moving or…?
Me:	No.
HSJ&J:	Oh. So what do you do?
Me:	I work for my Dad.
HSJ&J:	Family business, great! Will you take over when your Dad retires?
Me:	That depends. I’m bankrupt at the moment so I can’t be a Director of a Company or even operate under another name.
HSJ&J:	So…
Me:	Yes?
HSJ&J:	Let me get this straight. You’re divorced?
Me:	Yes.
HSJ&J:	Bankrupt?
Me:	Yes.
HSJ&J:	Single?
Me:	Yes.
HSJ&J:	And living with your parents?
Me:	Yes.
HSJ&J:	Oh my God, you are such a LOSER!!! Hey, everybody listen to THIS…!

And then they’ll award me the Biggest Failure since graduation crown and perform a completely spontaneous yet perfectly synchronised dance number to thank the Gods of High School that their lives turned out so well.

I’m thinking I need to have a plan. One of my very loveliest friends has helped me create some positive spin along these lines:

High School Judge & Jury:	So, Girl Bankrupted! Wow! What have you been up to since high school?
Me:	We-ell… got a degree…
HSJ&J:	That’s great! Congratulations!
Me:	… and travelled a lot, overseas and around Oz.
HSJ&J:	That’s great. Are you married? Any kids?
Me:	No.
HSJ&J:	Awww, well, there’s still time – are you seeing anyone?
Me:	No, I’m just having some time for myself at the moment.
HSJ&J:	Lucky! I know sometimes I would just LOVE five minutes to myself, what with the kids and my high paying yet surprisingly easy and incredibly fabulous job/business! Where are you living now?
Me:	I’m living in [suburb] [state] near the beach, it’s lovely.
HSJ&J:	Sounds great!
Me:	It is. Really.
HSJ&J:	So what do you do?
Me:	I’m doing some consulting work in [my chosen field].
HSJ&J:	Great! Sounds interesting.
Me:	It is, I’m really enjoying it. SO, tell me more about YOU…?

Voila! No lies, just focussing on the positive and deflecting. Everybody loves to talk about themselves, don’t they? I’m not planning on establishing any meaningful relationships with these people and, by the time I see them again (possibly our 30th anniversary reunion) this whole thing will be behind me, right?

What’s the worst that can happen?

For me, the worst possible consequence of bankruptcy is the loss of reputation. My integrity is the thing that I hold most dear and bankruptcy immediately casts aspersions upon both your business and personal ethics.

Well, the worst has happened. My ex-business partner visited my previous place of employment, under the pretext of accessing services, and told my former colleague that I had filed bankruptcy. My former colleague told my successor and my successor told my former boss. I found out because I rang my former boss to tell her myself because I had a sneaking suspicion that this might happen and I wanted her to hear it from me first. My reputation at work and among the local business community was a great source of pride for me. I was well-respected and held up as a local role model for small business and also young women in business. I believe this reputation was well-founded but I know there will be doubts about this now, particularly because of the strength of my ex-partner’s obvious malice. So why does she wish to see me denigrated when I am so clearly vulnerable?

As I mentioned in a previous post, I helped this woman set up a business under a partnership agreement. This agreement was never written down. It was a verbal agreement between friends and, at the time, I didn’t see the need for a written agreement – I felt it would sully the goodwill between us (yes, I was that stupid). The business was based on a virtuous ideal and we both claimed that we “weren’t in it for the money”. However, in my opinion, as the business became more successful, my business partner felt more and more oppressed by my involvement in the business. She saw the business as her “baby” and resented her dependence on me for the simplest of things, such as drafting a letter or raising an invoice (her literacy skills were very poor). I still don’t understand her motives for asking to dissolve the partnership, she claimed with great bravado that she would continue to operate without me but then did a back-flip a month later and said that I would have to continue to operate the business but she wouldn’t pay me any money. By that time I was so angry, there was no way I could ever work with her again. So I did my best to undo everything I did. I pulled down the website and online store I created. I cancelled the eNewsletter (always sent out under her name but actually written by me), rang the national distributor and told them there was a copyright dispute on the products and posted comments anywhere our products were recommended online. The most destructive thing I did, for which I feel some small remorse, was cancel the domain for the business. This meant that she lost her primary email address and none of our clients could find her.

Do you think she might be a little upset with me?

I don’t regret one single thing I’ve done. This woman took advantage of me, to the point where I can only blame myself for allowing it to happen. Personally, I have never received a single cent from the business and yet she benefited enormously financially, professionally and personally from my skills, qualifications and friendship. My brain simply cannot compute why she would ruin a situation that was so great an advantage for her. I can only surmise that she was not disclosing everything relevant to her decision.

Unfortunately, I am bankrupt. When I re-read my post through your eyes, I am aware that any reader would still reserve some distrust of my version of any event simply because I am bankrupt. So if you are considering bankruptcy, you need to consider this aspect: you will always be presumed culpable in any situation past or present, regardless of your ingenuousness. More than anything, this hurts. You can be discharged after three years and you may even get your credit rating back after seven, but your reputation will take a lot longer to rebuild, if that is even possible. I guess I’ll let you know.

You don't own me - or do you?

Well, it appears my fears with regard to my intellectual property were well-founded.

If you are considering bankruptcy, or are already bankrupt, you need to understand the implications this may have on any intellectual property you created prior to becoming bankrupt. This includes any ideas you have put into form such as a piece of writing, songs and other artistic works, as well as technical drawings or business plans.

Back in 2006, I entered into a partnership with a woman who was developing some educational resources. I won’t go into the details because I may end up exposing myself to a confidentiality breach and, lord knows, I am well over lawyers… However, the premise of setting up the partnership was that this woman required my professional services but was unable to pay, therefore we agreed to develop the products together (she is a teacher assistant, I am a professional designer) and we would share the intellectual property and any subsequent profits. Over the past 4 years, we also became close friends.

In the first three years, I focused a lot of my time on this business, all weekends, evenings and hours that I perhaps should have been focusing on my existing business. I also used the resources available in my existing business to develop the new business. The new business flourished, the products were received favourably in the market and my partner was able to give up her job and work full-time for the same salary plus expenses. I continued to work in my business and my second job as well as put in up to 20 hours per week in the partnership. I received no income from the business but, throughout my own troubles, it was a ray of hope to me. No matter what happened, I knew I could eventually work in this business and it was something I was passionate about and truly enjoyed.

My business partner was aware of my financial problems and had even taken me in as a boarder on two occasions. I always paid rent and my own expenses, as well as cared for her dog and garden while she travelled all over Australia, to the UK and Asia, for the business, all expenses paid.

In December 2009, we were preparing to launch the entire product range through a national distributor for the beginning of the following school year, an event that would potentially take the business from a turnover of just under $100,000 to possible 5 or 6 times that amount. My business partner had mortgaged her house to pay for the stock and we only needed to sell a portion of the first shipment to recover costs and repay the loan. This was the performance indicator I was led to believe would allow me to receive an income from the business and perhaps provide the relief I needed to reduce my personal debt and possibly avoid bankruptcy. For some reason, this was the point at which my business partner decided she didn’t want me as a partner any more.

Initially my partner offered to pay me “anything I want” to release her from the partnership, we would part amicably and go our merry way. Although I was disgruntled, it was an opportunity for me to avoid bankruptcy and perhaps salvage something from all my hard work. However, as time progressed, and she had rejected three proposals I had put forward for the dissolution of the partnership, it became clear that she would not be paying me anything and intended to keep using the intellectual property. Finally, she made an offer of $20,000 for everything. I declined and the process stalled.

As a matter of process her accountant was informed of my bankruptcy this week.

Today, my ex business partner’s (and former so-called friend’s) lawyer sent me a letter offering to pay $17,500 for my share of all the intellectual property included in our partnership agreement. This represents three years and hundreds of hours of professional design work.

Legally, I have no power to decline the offer. The minute someone makes an offer for anything you own, it is considered to have value and immediately falls in to the power of the Trustee as part of your estate. Even if I had given away my share of the copyright to someone else, if anyone wanted to buy it, the Trustee could claim it back and sell it to her.

What I didn’t know: This rule applies to other items of value as well. Most houselhold items are exempt and you can apply to make items of sentimental value exempt (such as awards or medals you have received) but the creditors will have a vote as to whether the items should be exempted or not. If anyone makes an offer on it, the Trustee takes control of the item and decides whether it is worth selling for the benefit of the creditors.

For the first time, I really feel the effects of bankruptcy as I have no power and no credibility, even if I tried to expose this woman. She didn’t cause my bankruptcy and she did not do anything illegal, just morally questionable. I should have asserted myself from the beginning of our relationship because I suspect her intentions were dishonourable from the start.

Maybe I am an idiot after all, but at least I’m not a liar.

My Trustee aka my new best friend.

Spoke with my Trustee for the first time today. She was OK. I immediately went into overly-helpful-I-have-nothing-to-hide mode but she seemed completely immune to my demeanor. A seasoned public servant, no doubt.

She asked me some basic questions, just confirming the information in my documents. I answered “yes” to everything. She was very interested in the money that the business owed me. Pretty much my entire personal debt can be traced to the business Chart of Accounts as a loan to the company. So she could see that I hadn’t been living the high life for five years, stashing money away in an overseas account. Clearly everything I had personally borrowed had gone the way of everybody else’s money. She was also very interested in the assets in the other company of which I was a Director. I am a share holder of that company and it is holding significant stock.

What I didn’t tell her is that I am currently in dispute with my former business partner over the intellectual property held by the partnership that we had prior to my bankruptcy. I don’t think it has any impact on my estate because there is no real value in it, only the value that we would assign if one of us sold out to the other. I’m aiming for a settlement where we each take what we created and walk away.

I asked the Trustee if she would have to tell my former partner that I am bankrupt. She said that even though the partnership has been dissolved, it was very recently and it still showed up on the Australian Business Register, therefore she would have to inform her. I’ve got a really bad feeling about this.

I felt the Trustee had my best interests at heart but I’m hardly a great judge of these things. She said that my estate is very complicated because there are a total of two companies of which I am a shareholder (one of which owes me over $50,000), a partnership which has recently been dissolved and seven creditors totally $402,000 (three bank loans and the rest are personal guarantees on informal loans to one of the companies). I apologized and said I was glad I didn’t have to think about it anymore.

So the letters have definitely gone out. I don't know what they say or what happens next. Apparently that's no longer any of my concern. Fine by me.

Postscript: I rang the Trustee back and spilled the beans about the intellectual property. I just couldn’t deal with the idea that I was starting my fresh, new start on the wrong foot by not disclosing fully. I’m glad I did because she said that I can’t take any legal action while I’m bankrupt. I didn’t know this. Anyway, she said that I only had to disclose if the intellectual property was deemed to be of value, the Trustee rarely takes intellectual property into consideration as an asset because it is too hard to prove the ownership and the value. Fingers crossed.

What happened after it happened

My first full day of bankruptcy was surreal. I didn’t feel any different but I had a sense that somewhere, somehow, the machinations of the world outside were groaning and clunking to turn the ship so slowly I barely saw the light changing direction. Phone calls were being made, letters were being sent. Who already knew? Who was still ignorant to my financial demise? A tree was falling in my forest and I could barely hear it myself. Was it really happening?

In fact, the silence was disturbing. My phone had been ringing constantly up to that day. The banks were harassing me relentlessly but as soon as I gave them my bankruptcy details, they disappeared immediately. Suddenly, I had the quiet I had yearned for to think about something else. Instead, I decided to worry about it all for a bit longer, as is my wont. A few sleepless nights, overwhelming anxiety and tearful phone calls with friends and family later, I made another decision to just get over it. I mean, apart from winning the lottery, there was nothing more to be done. It was out of my hands forever.

I suppose that was when I decided to start this blog. I’m still afraid of what the future holds for me, I have no idea what impact this is going to have on my life. At least, if I record it here, I can look back retrospectively and see the path I bumbled down. I really wish I was you. Reading this is either making you feel apprehensive, because you recognize my plight, or self-assured that you would never find yourself in this situation. If it’s the former, I sincerely hope that this blog will give you some insight where I have none. If the latter, I confess I envy you, but I wish you well, and presume to hope that you may learn anything from my experience to strengthen your position even further.

So again, how am I living day to day? Well, I am extremely lucky to have a very supportive family. I have a lovely little room in my parent’s beautiful home, my childhood home. Fortunately, my qualifications and experience are of some use to my Dad in his business and we have come to an arrangement whereby I work for him for a nominal pay rate and I pay my room and board. I admit it’s a bit of a cop-out but I just need six to twelve months to recover, mentally and emotionally, and get a job. My work and living arrangements also allow me to focus on some of my creative ideas which have been suppressed by the inescapable pressure of my finances.

As I mentioned before, I am using the services of an administrator so I don’t even have to pay my bills, they do that. I receive $70 pocket money per week for personal and entertainment expenses and it is amazing to receive that money and spend it, without guilt, on anything I like. I haven’t had the freedom to do that for five years. My parents live near the beach so I go for long walks, I go to the library, I hang out with my friends and family, always with the ever present cloud of this event looming somewhere above me and the occasional raindrop falling on my head. But as a great friend and mentor of mine says: your eyes are in the front of your head for a reason. And she is right, there is no point in looking back now.

My fourth (and final) attempt

After I finally escaped and got home, I rang the banks and gave them my new details and then I went looking for someone to get this damn bankruptcy happening. I went to the ITSA website and looked for someone to manage it for me. I had no idea how I would pay but I just wasn’t up to dealing with it. It was a bit difficult to locate the Registered Debt Agreement Administrators on the site and I probably should have gone with a Registered Trustee instead but I’m glad things worked out the way they did.

Most Registered Debt Agreement Administrators will manage full bankruptcy for you but usually their core business is in providing a complete budget management solution. This means that you have an extensive consultation process to create a livable budget and your income is sent directly to them. They pay all your bills and allocate a living allowance to you, they also ensure that you put some of your money away as savings. I highly recommend this style of administration for anyone who is not yet bankrupt but struggling to meet their debt repayments. In fact, I cannot stress enough that, if you still have the option of avoiding bankruptcy but you can see trouble on the horizon – get thee to an administrator. Even if you need to obtain a Part IX Debt Agreement or eventually do end up going bankrupt, the sooner you can subscribe to a system like this, the easier the transition will be and the quicker your overall recovery.

For me, it was too late. I needed to go bankrupt – fast! Which is why I should have gone straight to the Trustee, with my home made bankruptcy papers (see previous post). The Administrator I chose followed their usual procedure of assessing my financial situation over a period of three months to make sure that bankruptcy was the right option. Those guarantees weren’t going anywhere so it was a moot point but I wasn’t too concerned at first. I was under the impression that they would manage the situation with the banks until the bankruptcy was official but that was not the case. After two months of constant harassment from the bank (read a typical phone conversation here), with one bank extracting my precious pocket money directly from my account, I ended up losing the plot on the phone one day. I insisted that they waive the procedure and fast-track my bankruptcy.

What I didn’t know: Once you have made the decision to file any type of bankruptcy, be sure to move any funds away from the banks with which you have outstanding debts. Up until the point you are officially bankrupt, the bank has the right to access your account and take funds. I found this out the hard way whilst attempting to pay my physiotherapy bill using EFTPOS.

So, after a small delay, I achieved bankruptcy on 17 May 2010. I actually celebrated. I emailed my family and close friends to give them the news, they responded with congratulatory messages, although the irony was not lost on any of us. I rang all the banks, armed with my bankruptcy number, bid them good bye and good luck and then I got in my Dad’s car, went for a drive and had a really good cry.

When the banks come a'calling

Below is a script of the conversation I would have daily with at least one bank. In the final month before my bankruptcy became official, I had this conversation at least once daily for each of my three accounts. Two of the accounts were with the same bank and sometimes I would get a call in the morning and one in the afternoon for the same account. So, on more than one occasion, I spoke with the same bank four times in one day and had the exact same conversation with each of them as written below – almost verbatim.

My mobile rings and “private” appears on the screen. This is code for “bank”. I pick up the phone and wait for the inevitable call centre pause before speaking:

Me:	Hello, this is Girl Bankrupted.
Random Bank Monkey:	Hello, may I speak with Grill Bunkrap?
Me:	This is Girl Bankrupted speaking.
RBM:	Hello, Miss Bunkrap, this is the Big Four Bank calling regarding a personal banking matter, for security reasons may I begin by confirming your date of bir-
Me:	Num-Month-Nineteen-Seventy-Three
RBM:	Thank you, Miss Bunkrap, can you also confirm your current residential addre-
Me:	Num-Street-Suburb-Postcode
RBM:	Thank you, Miss Bunkrap, we have a mobile number listed for you, but do you wish to add another num-
Me:	No thanks.
RBM:	You don’t have a landline at home that you can provide?
Me:	Nope.
RBM:	Okay, Miss Bunkrap, the reason for my call today is your personal loan account which has an amount of $2045 which is now 160 days overdue. You also have another payment for $665 which will fall due on the 25th of this month. Can you explain why this account has fallen into arrears and when you will be able to bring this account back up to date?
Me:	Just scroll down on your notes a bit, you’ll see that I’m actually in the process of going bankrupt, I’m just waiting for the administrator to lodge the documents and give me the bankruptcy number.
RBM:	Oh… one moment, please… oh yes, I see you are planning to file bankruptcy… Do you have a bankruptcy number yet?
Me:	No, that’s what I’m waiting for.
RBM:	Okay, well as soon as you have that number, please call us immediately so that we can close the account and then we will not need to call you again.
Me:	Yes, that is my dearest wish.
RBM:	Certainly, Miss Bunkrap. I need to advise you that if this account is not brought up to date, you may be at risk of default, do you understand what default means?
Me:	Yes.
RBM:	This would be recorded on your permanent financial record and could affect your ability to obtain credit in the future.
Me:	Ye-es… I’m thinking that bankruptcy will probably achieve the same effect anyway?
RBM:	Okay, well, um… there isn’t much more I can do. I’ll make a note here that you are waiting on your bankruptcy number and I’ll try to delay the next phone call for a week. (NB/ only the nice ones would do this and I’d still get a call at latest next day.)
Me:	I’d appreciate that.
RBM:	Oh, okay, well thank you for your time.
Me:	Not a problem!

And that was that. Not so bad, really.

My second and third attempts

I was starting to get a bit scared now. All the phone calls from the banks (read a typical phone call) were really starting to get to me and I just didn’t know what they would do – would I get arrested or something? I mean, you can’t just stop paying and expect nothing to happen. So I scraped together another couple of payments to stave off the terrible unknown and then rang another company. I contacted one of the aggressively advertised debt consolidation businesses that claim they can solve all your financial woes in five minutes over the phone, you know the type. They asked me all the same questions as the other place and then assured me they could secure a Part IX for me! It took about fifteen minutes and then they emailed a form to sign. The body of the email looked as though it had been copied and pasted, my name and some of my other details were in a different font, obviously added in afterward, and the pdf attachment had been photocopied and scanned a million times – it all just looked way to dodgy. I didn’t sign the form.

Instead, I made a pathetic third attempt to go bankrupt by doing it myself. I went to the ITSA website and read almost every page. I downloaded the bankruptcy forms and filled everything out as best I could. I’m a pretty organized person and had most of the information readily available. My biggest problem was a lack of tax returns for the companies I had been directing. I emailed our accountant to get the latest set of financials and received a curt email requesting payment before they would be released. There was about $2000 in fees still outstanding for that financial year. I didn’t have the money and I felt so ashamed I couldn’t bring myself to tell the accountant why I needed it.

So what did I do next? Nothing. I stopped paying my credit cards and my personal loan, I stopped answering my phone if it came up “private” or “unknown” (this is synonyn for “bank”), I didn’t open any letters I received from the bank and I just concentrated on winding up the business as best I could so I could escape and return home to my parents. And you know what happened next? Absolutely nothing. No bailiff knocked on the door, no scary biker types turned up to break my knees, the bank occasionally caught me on the work phone but I just told them I was going bankrupt and they would make their little notes and leave me alone for a week. I got away with this for four months.

My first attempt

It took four attempts for me to achieve bankruptcy.

The first time I approached a small, local debt consolidation consultancy, I won’t name them here. It was owned by someone I knew and I thought long and hard about using them simply because I was worried about the confidentiality issues. But I figured it’s the same as any client/consultant relationship and I had heard this company was very good. I made an appointment and went in for a consultation.

At this time I was hoping that I might be able to get a Part IX Debt Agreement instead of filing for full bankruptcy. What’s the difference between a Part IX and Bankruptcy? But I learnt from the consultant that this would not be an option. I had thought that because only the banks were actually pursuing me, they were the only creditors I would have to consider in my insolvency. Looking back this was pretty naïve but I was putting my own particular spin on the definition of insolvent:

“A person is solvent if, and only if, the person is able to pay all the persons debts, as and when they become due and payable”
s95A Corporations Act 2001

I figured I didn’t have to include the loans that weren’t yet due and payable ie. The big ones I had personally guaranteed. Wrong!

In the end my total debt including the guarantees was over $400,000 and the limit for a Part IX is $80,000. I was definitely going bankrupt. Completely, fully and utterly bankrupt.

What I didn’t know: If you have a joint debt with someone eg. You and your spouse are both listed on your mortgage, or you and all the other Directors in your company sign a personal guarantee, for the purposes of applying for bankruptcy, or even a Part IX, you are liable for the full amount, not just your “share” of the loan.

Okay. Decision made. I was in the right place, with professionals. How hard could it be? I thought going bankrupt would be like falling off a log. I imagined that as the words passed from my lips, a supernatural debt delegation was being summoned from the deep, I’d sign a lengthy contract that I would be too disparaged to read and my soul would be forthwith dispatched via overnight courier to credit hell.

Not quite. Unbeknownst to me, the company I was dealing with was in the process of being sold. Somehow, in the confusion of the handover, their phones stopped working and my case fell off their database - they just never got back to me. I rang and rang and they simply never got back. The banks were chasing me for payments on my Credit Cards and personal loan and I was referring them to this company and nothing was happening! - to be continued...