• Income;
• Assets; and
• Unsecured debts

These statutory thresholds will govern which personal insolvency product you may be eligible for and will also govern what assets you can retain in bankruptcy and whether you will become liable for statutory income contributions in bankruptcy.

Income Contribution Calculator

These thresholds are updated by ITSA every six months and are indexed in accordance with the CPI.

Debt Free are industry experts and can explain how these statutory thresholds may be applied to your situation and which personal insolvency product is best for you.

To learn more about our products:

• Debt Agreeement;
• Personal Insolvency Agreement;
• Bankruptcy.

Some 6,619 people who were insolvent and unable to pay their bills entered into a debt agreement in the past financial year, new data from an industry regulator shows.

The group comprises 20 per cent of Australia’s 32,909 new personal insolvency cases.

By comparison, 25,981 financial battlers declared themselves bankrupt.

This bankruptcy tally was 400 shy of the all-time high in the 1998/99 financial year.

In that year Australia’s 811 debt agreements made up less than three per cent of insolvency activity.

Federal industry regulator, the Insolvency and Trustee Service Australia (ITSA), has called the debt agreements, where creditors are usually repaid over two to three years, a good news story.

“The thing to remember with debt agreements compared to a bankruptcy is creditors will see a return with debt agreements,” ITSA executive director Peter Lowe said.

“While there might be a number of people in financial distress, a good proportion are able to manage their way out of their predicament.

“Initially creditors were sceptical whether they should support debt agreements. These numbers speak for themselves.”

Debt agreements are allowed if a struggling borrower has not been a bankrupt, has an annual after-tax income of less than $60,200 and unsecured debt of less than $80,200.

The agreements have been around since 1996.

Unlike a bankruptcy, people entering into a debt agreement do not have to surrender their assets.

Debt agreement administrators have to make sure creditors are paid before they charge the struggling borrower administration fees under laws that came into effect in July 2007.

A licensing system for debt agreement administrators was introduced also.

Administrators are still free to set fee rates for developing a repayment proposal.

Fees for monitoring a debt agreement are still charged over the life of the arrangement.

Australian Financial Counselling and Credit Reform Association chair Jan Pentland said it was premature to declare the legal changes a success.

“We’d like to say they are. It’s too early to say,” she said.

Ms Pentland said only one-third of debt agreements entered into between 1996 and 2007 worked because administrators were more concerned about collecting fees than developing the right repayment strategy.

“In the past, the major flaw was there was heavy advertising of debt agreement administrators,” she said.

“Debt agreement administrators made money putting people through the process. The fact is only one-third were working.”

Total insolvency activity grew by 3 per cent in 2007/08.

This was lower than the previous financial year’s 17 per cent pace and the record high growth of 28 per cent during the recession of 1991/92.

Over the past two decades, personal insolvency rates had grown by a trend average of about 7 per cent, ITSA said.

Lehman Brothers chief economist Stephen Roberts said insolvency rates were likely to increase at a faster pace this financial year as unemployment rose.

The statistics reveal the following:

• 11% annual increase in total Personal Insolvency appointments
• 29% annual increase in Debt Agreement appointments

The statistics reveal that many Australians (8,567) in the last 12 months (July 2008 to June 2009) avoided formal bankruptcy by entering into a legally binding Debt Agreement with their creditors.

27,503 Australians couldn’t avoid bankruptcy and were declared bankrupt in the same period.

*Personal Insolvency Statistics sourced from ITSA

• increasing the minimum amount for which a creditor can petition for bankruptcy from $2,000 to $5,000;
• increasing the stay period from when a declaration of intent to file a debtor’s petition is filed to when a creditor may commence action to recover debts from seven to 21 days;
• introducing a more efficient and transparent process for fixing and reviewing trustee’s remuneration in Bankruptcy
• strengthening the penalties for some offences, particularly those involving fraud;
• Removing the Bankruptcy Districts from the Act; and
• enhancing powers for the Inspector-General in bankruptcy to investigate possible offences.

The Bill has been the subject of extensive public consultation following the release of an Exposure Draft last year.

The draft legislation includes many technical changes but of most interest to the average Australian the reforms to the Bankruptcy Act include:

1. The Debt Agreement thresholds are likely to be increased moderately.  Currently under the Bankruptcy Act if you owe unsecured creditors up to $$88 379.20 you can enter into a Debt Agreement.  Under the proposed bankruptcy amendments, this threshold is set to increase moderately. At this stage the rate of increase is not known however the government has previously indicated it proposed to increase this threshold by around 20%. This would mean if you have unsecured debts of less than approximately $100,000 you would become eligible for a Debt Agreement under the proposed reforms to the Bankruptcy Act.  Currently if you have unsecured debts which exceed $$88 379.20 you are not eligible for a Debt Agreement and you must consider a Personal Insolvency Agreement. This amendment to the Bankruptcy Act will enable consumers to access the more cost effective personal insolvency regime.
2. The statutory minimum for which you can become bankrupt.  Under the current Bankruptcy Laws a creditor can apply to the Court to make you bankrupt if you owe a creditor more than $2,000.  The government has recognised that this is a small amount of money on which somebody can become bankrupt and is proposing that this amount be increased to $10,000.

The full Bankruptcy Legislation Amendment Bill 2009, can be downloaded from the Attorney General’s web site.

While many business and industries are facing a downturn, one group’s flooded with work: debt counselors …, Anna Hpisley hears more from Anthony Warner, Chief Executive of Get Debt Free (Economy Business and Finance, Debt Management).

Broadcasted on 3/11/2008

THE economic hard times are beginning to bite, with thousands of people unable to pay their bills now desperate to cut a deal.

Debt agencies report they are working seven days a week as people, even those earning more than $100,000 a year, flood the phone lines asking for help in tackling credit card debt and personal loans they are no longer able to repay.

“Six months ago we were getting around 500 calls a month. Now, it’s 800 calls,” said Anthony Warner, chief executive of Get Debt Free.

Most of the people who contacted him felt they were “getting nowhere”, Mr Warner said, as they struggled to pay off their debts in increasingly tough economic times.

“It is all to do with credit card and personal loans that people have taken out that they cannot afford,” he said.

“It is not atypical for a person to have five or six credit cards.”

Figures compiled by Insolvency and Trustee Service Australia – which held its “bankruptcy congress” on Friday – show that from July to September, 2202 people entered into debt agreements, a 35.59 per cent increase compared with the same period last year. Personal insolvency agreements rose to 112 for the quarter, up from 47 in the correspondong period last year.

A debt agreement is entered into by a person who has less than $82,501 in unsecured debts – such as credit card debt – or earns less than $85,000.

If the debt or income is higher, a personal insolvency agreement can be negotiated.

Under both agreements, a deal is negotiated with a person’s creditors and any interest is frozen.

“The really sweet spot is that creditors will readily entertain proposals from 60c in the dollar and above, and in some circumstances consider less,” Mr Warner said.

“We work out a budget, how much they can afford to repay in a month, and we take that available income and apply that over three, four, up to five years to see what kind of dividend can be achieved for creditors.”

But there are downsides. A person’s credit rating is affected for seven years and ITSA keeps a national register of the agreements. The agreements involve fees, which can range considerably in the market. The ITSA conference on Friday reported that set-up fees alone could range from nothing to $1800. An administration charge was also payable and could range from 15 to 27 per cent of the repayments.

Mr Warner said his company offered free phone consultations, and Debt Fix administrator Nicholas Bregozzo said he did not charge if he could not help aclient.

Mr Bregozzo said he was working seven days a week to keep up with a “flood of inquiries”, but it was not just people on low incomes seeking help.

“We have seen a lot of people who wouldn’t normally come through – double-income households on fairly decent incomes up to $150,000,” he said.

“Credit in the past has been easy to get.”

But for creditors who voted against an agreement, Mr Bregozzo said they might end up finding themselves worse off when the customer was forced into bankruptcy and unable to pay much, if any, of their debt.

“Some creditors are very good and others need to realise that a ‘no’ vote for a debt agreement isa ‘yes’ vote for a bankruptcy,” he said.

Written by Susannah Moran, The Australian on 3/11/2008

“What happened in Iceland is completely unacceptable,” he told BBC television. “I’ve been in touch with the Icelandic prime minister, I’ve said that this is effectively illegal action that they’ve taken.”

He added: “We will take further action against the Icelandic authorities wherever that is necessary to recover the money.”

Brown earlier said Britain was “trying to freeze the assets of Icelandic companies here” and told Sky News television Britain had “taken action to seize the assets of Icelandic banks.”

A Treasury spokesman told AFP this referred to the decision announced on Wednesday to freeze the assets of Icelandic bank Landsbanki using anti-terrorism laws.

Brown’s tough talk came as the Local Government Association, which represents local councils, said that 108 of them had deposited nearly 799 million pounds in Icelandic banks.

Many local councils say there is no risk to services such as housing, social services and waste disposal but the LGA said some may have “specific problems”.

It and the government issued a joint statement after meeting Thursday saying they would agree “an appropriate set of ways to assist” local authorities facing “severe short-term difficulties.”

One local authority, Kent County Council, had 50 million pounds deposited in Landsbanki’s British subsidiary Heritable and Glitnir Bank.

Transport for London, the agency responsible for the capital’s public transport, had a further 40 million pounds invested with Kaupthing Singer and Friedlander.

The bank, along with Glitnir and Landsbanki — Iceland’s three biggest — have all been nationalised by the government in recent days.

Some 15 police authorities — the bodies which oversee police forces — also had nearly 100 million pounds invested in Icelandic banks, according to the Association of Police Authorities, which represents them.

London’s Metropolitan Police Authority said it had 30 million pounds invested in an Icelandic bank out of a budget of 3.5 billion pounds.

The meltdown in Iceland has sparked a diplomatic dispute between the two countries, with London threatening legal action over depositors’ savings.

Reykjavik, however, has said the two countries would work together to try to find a solution through official diplomatic channels.

Brown announced legal action against Iceland on Wednesday, but officials could not confirm on Thursday if London was pressing ahead or seeking a diplomatic solution.

The 410 local councils in England and Wales are responsible for around 113 billion pounds’ worth of spending and employ around 2.2 million people in services from culture to refuse collection.

Brown has pledged to do whatever it takes to recover individual savers’ money from banks including Icesave, an online British arm of Iceland’s second biggest bank Landsbanki.

Press reports said nearly 300,000 British customers had four billion pounds deposited in accounts with Icesave.

But Finance Minister Alistair Darling admitted the protection may not extend to councils.

“I think they’re in a slightly different position in that they are more of an informed investor,” he told lawmakers Wednesday. “But this situation is evolving, we are trying to sort the matter out with the Icelandic government.”

We help Australians get out of debt! If you are struggling with debt, donít delay and call us toll free on 1800 98 10 70.

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RACKING up debt is easy. Paying it off can be a little trickier. Trickier still can be negotiating your way out of trouble if you fall behind in your payments.

When your bills turn red and scream words like ‘final demand’ then you’re only days away from being added to a debt collector’s hit-list.

The thought of a bunch of heavies turning up in the middle of the night to repossess your plasma TV is scary, and not necessarily accurate.

In fact, you’re more likely to get a polite phone call from a mild-mannered, office-bound debt collector in the first instance.

An employee at credit agency Dun & Bradstreet says debt collectors arenít “out to get” debtors.

“We’re not monsters, weíre just doing our job.”

Debt collectors would like to be thought of as ‘reminder services’, making sure people stick to their obligations.

Christine Christian, chief executive at Dun & Bradstreet says debt collectors are an important cog in the economyís wheel, because they make sure businesses get paid.

“Collection agencies are integral to the economy,” said Ms Christian

Many collectors not only help to retrieve accounts payable but also guide their clients when it comes to making better business decisions.

“We take our purpose very seriously,” Ms Christian said.

Don’t be bullied

But there are plenty of people out there who have had bad experiences with debt collectors.

“In our experience debt collectors are often aggressive and rude. Not surprisingly debtors just want to get off the phone and agree to make repayments which they can’t afford” said Jan Pentland from the Australian Financial Counselling and Credit Reform Association.

The Australian Securities and Investment Commission have strict guidelines around debt recovery.

According to ASIC, a collection agency should not contact a debtor more than three times per week, or 10 times a month at most.

This contact includes both speaking on the telephone and letters sent out to the debtor.

Many credit agencies aim to follow these guidelines, however some can resort to forceful methods to get debtors to pay.

GE Money was forced to compensate some of its customers earlier this year after its debt collection staff resorted to unreasonable tactics to get customers to pay up.

“Debt collectors are not well trained if at all. They have little if any training on what the legalities of debt collection, and there is a large turn over in staff – not surprisingly,” says Ms Pentland.

Know your rights

Knowing your rights may be the key to getting the best deal when it comes to settling debt.

“It’s important consumers know when they’re being bullied,” says Carolyn Bond co-chief executive officer of the Consumer Action Law centre.

Paying debt as soon as possible is the way to avoid getting into trouble, Ms Bond says.

But if you can’t pay the debt, it’s best to admit this upfront so you can come to some kind of arrangement with your creditor.

“We’re always willing to arrange a payment plan if it means getting the debt paid eventually,” says one D&B employee.

Avoiding the debt collector’s call could only land you in a worse situation and could be the worst thing you could do.

“Normally we aim for a 21 day turn around, once the debt is referred to us,” says Ms Hurley.

“After this period legal action is often taken depending on the size of the debt,” she said.

Piling up debt

Coming under the scrutiny of a credit agency could be as easy as falling behind in your household bills. If your name is on a utility bill make sure that bill is being paid ñ especially if you’re living with other people.

Dun & Bradstreet research shows that 8 per cent of Australians expect to fall behind in their bill repayments in the next few months.

As well as bills, there are a whole host of consumer debt that can get you into trouble – like in-store finance deals (the buy now, pay later kind), or the short-term “payday” loans taken out to survive between pays, or any other easy credit.

And then there’s credit cards. Australians racked up $44 billion of credit card debt over the past year.

A survey conducted by NEWS.com.au earlier this year revealed 45 per cent of borrowers were struggling to pay debts, with 10 per cent often late on loan repayments.

If you do fall behind in your repayments don’t ignore it ñ it won’t go away. Ring your utility provider/credit card company/creditor and explain your situation.

You might be able to negotiate a repayment plan before debt collectors are called in.

We help Australians get out of debt! If you are struggling with debt, don’t delay and call us toll free on 1800 98 10 70.

Take control of your finances and get the relief from debt you need. Call us toll free on 1800 98 10 70, our initial personal debt advice is FREE and without obligation so you have nothing to lose. Get Debt Free Australia!

Get Debt Free Advisors help Australians find the most suitable solution, call toll free now on 1800 98 10 70.

AUSTRALIANS once were a nation of savers. But next month the Bureau of Statistics will tell us that households owe $1 trillion in debts and other liabilities, making us world-class debtors.

Our debts are now seven times the $136 billion we owed in 1988, when the bureau began counting.

Even since 2001, in five years, we have doubled the amount we owe: mostly to banks that borrow the world’s savings and lend them to us.

Australia’s transition to a nation of debtors has been one of the most profound economic changes in our history ó and we don’t know how it will end up.

Optimists point to soaring asset values and rising net wealth to argue against any concerns. Australians, they say, are not borrowing their way into trouble, but becoming financially more sophisticated: borrowing to buy assets offering bigger returns.

While household debts are now $1 trillion, household assets are now $2 trillion. We are growing wealthier, with our net worth in financial assets ó mostly superannuation, plus shares and bank deposits ó doubling since 1996 to $1 trillion. Add the soaring value of our real estate, and you see why we feel rich enough to borrow.

Once, we borrowed if we didn’t have enough money. Now, increasingly, we borrow because we have enough money to be comfortable taking on debt.

Studies show the largest share of debt is owed by the richest 20 per cent of households. Many are borrowing to take advantage of Australia’s generous tax rules for investors. But the pessimists argue that soaring debt makes households vulnerable when times get tough. Our eight million households on average now owe $125,000 each. We spend 11 per cent of our take-home pay just to pay interest on our debts ó way above the 9 per cent we paid in the high-interest days of 1989-90.

That will get far higher. Reserve Bank governor Ian Macfarlane told The Age this week that household debt could grow a lot more yet. Only one in three households has a mortgage, and many are not large. On the banks’ lending criteria, that debt could double again in a few years, making this the most highly-indebted nation on earth.

Mr Macfarlane is both optimist and pessimist about the debt. On one hand, the Reserve’s research suggests that, by and large, households have borrowed sensibly, and lenders have been mostly prudent. While there are signs that both are now taking on more risk to get more yield, a crash is unlikely.

Mr Macfarlane’s real concern is what the debt might do to the economy. The next shock that hits us, he warns, could be made much larger by households cutting back sharply on spending to protect their investments.

In 1990-91, he said, household spending held up despite crashing business investment, ensuring that the recession was relatively shallow. “What I fear is that next time the household sector won’t be the same source of stability,” he said. “The household sector might tighten its belt, really very sharply.”

Another concern is that the value of our housing assets rests on global markets’ willingness to keep lending us $50 billion a year. Our growth in spending is being funded mostly by growth in borrowing, only secondarily by growth in income. What would happen to housing prices if the foreign money stops?

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