Personal Case Studies
1. Unemployed With Credit Card Debt
The client was a well remunerated Financial Planner who was laid off during the 2008 global financial crisis. Given his high income he had a number of credit cards that he was managing but also took advantage of, by using it for purchases and occasional trips to the snow fields. When he lost his job he had savings and therefore was ineligible for Centrelink benefits. He decided to make only minimum payments on his credit cards and try to make his savings last whilst he was looking for another job. Unfortunately this was not a good time to secure a job as a Financial Planner, so he was unemployed for much longer than anticipated. Finally he could no longer maintain the minimum payment on his credit cards. He went on hardship payments for 3 month, after which time he had also gone through his savings.
By the time he contacted A1 Debt Assistance he was on Centrelink payments and felt that he could not accept any lower paying jobs as that would not help him with his credit card obligations, at this stage he was also suffering from depression and had separated from his partner. Financial stress often causes this and your health and relationships suffer a lot . A1 Debt Assistance arranged his Bankruptcy within 5 working days. The total debt that was written off was approx. $85k. As he was fully relying on Centrelink payments, his total fee was $399.00 and he was able to obtain a fresh start. The client took on a job which paid him approximately only 50% of his previous salary as a Financial Planner, however, in reality he was left with surplus income to spend on himself, as he didn’t have any debts to service.
He and his partner reunited and he no longer suffers from depression. He is now receiving a reasonable income and is planning to return to his career with a higher income, but without the pressure to do this overnight!
2. Retired Business Executive
The client was a retired business executive on a pension. He did not plan his retirement very well and took a substantial amount of credit card debt into retirement with him. He was also accustomed to eating out and buying things without thinking of the consequences. He had a solid credit history and was able to continue his lifestyle for 3 years into retirement by using one credit card to pay off another. However, this tactic eventually failed and most of his credit cards were frozen.
This client was not a fraud, he was simply irresponsible with money. He had always believed that he would be able to get the odd consulting job here and there and catch up on his credit cards, but this type of employment did not cover his cost of living. He was in a relationship but did not live with his partner and she was not aware of his dire situation. He became extremely stressed when he realised his dilemma and could not see a way out and he had been suffering for quite some time before contacting A1 Debt Assistance. He had gotten to the stage where he would no longer answer his phone, fearing that it was debt collectors chasing him.
Within 3 days A1 completed and lodged his Bankruptcy documents. He has revealed his situation to his partner and how he was living above his means. He is now receiving a pension and resides with his partner and makes some spare cash via the occasional odd job. It is not the lifestyle he was used to, but considering his lack of planning for retirement, he is living quite well, sleeping well at night and unafraid of answering his phone. We wrote off in excess of $170k in credit card debt and he was able to keep all of his possessions including his car.
3 Home Owner
The client was going through a divorce and lost his home during the divorce settlement.
He had an income of about $70k and purchased a new house with a loan making up 95% of the actual value of the new property. He decided that he would furnish the home in a stylish fashion and used credit cards and store credit for these purchases. Unfortunately he did not manage to make the most of the interest free period with the store loans and he was paying a huge amount of interest for most of his furniture. This had a negative impact on his weekly budget and he found himself in a situation whereby he could no longer meet his payment obligations. As home values have dropped in recent times, he no longer had the option to sell his home and get himself out of debt. The loan was now higher than the actual value of the property. He tried to service his debt by entering into a Part 9 Debt Agreement, but this was still too much and he started to struggle with paying his utilities and doing the weekly grocery shopping.
When he started to fall behind in his mortgage repayments, he contacted A1 Debt Assistance. We set up a budget for him, so that he was able to make up the mortgage arrears prior to entering into bankruptcy. As there was no equity in the property he was able to keep the house but we included all of his other debts in the bankruptcy. There is a chance that the government can sell his house if the value increases, however this is still a much better outcome than he expected prior to speaking to us.