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Bankruptcy... A bit of a vent :-(.

Discussion in 'Living Room' started by moyjos, 1st Nov, 2015.

  1. moyjos

    moyjos Well-Known Member

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    so I found out recently that an reasonably close acquaintance of ours has gone into bankruptcy.
    They have ditched nearly $1 million dollars in business debt. (He is in the same industry as us nd she is my hairdresser ...hence all the details :))
    But....

    They have never owned a house, so they continue living in their waterfront rental house.
    She gets to keep her 2005 BMW because it was valued at less than $10,000. He had to sell his hot commodore, but "sold" it to his brother and is still driving it.

    They were "advised" to pay as much school fees as they could before declaring. They paid upfront for the next 2 years of private school so the kids know no difference. The same person told them to buy a heap of grocery cards. So they have the next 12 months grocery/grog and petrol sorted.

    Then I hear that they are allowed to earn around $60k EACH before they lose any to their creditors.
    She just thinks it is the best thing ever. Only 3 years and (in her words) the perfect stress free life making more $$$$ than they had before. They are planning a cruise for the summer school holidays.

    When did bankruptcy become so easy? I don't think bankrupts should be allowed to earn anywhere near $60k before paying creditors. How much should they earn you ask? Well I think probably the level of the aged pension would be a good guide. That is apparently what the govt see as a suitable amount to live on.

    She doesn't care at all that their credit rating has a bankruptcy on it. They have never any intention of buying a house.
     
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  2. Gockie

    Gockie I'm an ISTP-A female, so I might be a bit quirky! Premium Member

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    Omg... what a rort... I'd love to increase the consequences of declaring bankrupcy.

    Agree that the policy should be that they should pay it back once their earnings are as much as the aged pension.

    And gift cards etc. should be taken away - or converted back to cash and given to the creditors.... Very hard to monitor though.

    Private school fees refunded and given to creditors.
     
    Last edited: 1st Nov, 2015
  3. Bayview

    Bayview Well-Known Member

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    Karma will love them sooner or later
     
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  4. moyjos

    moyjos Well-Known Member

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    Sadly I don't think it will. Technically they have none absolutely nothing legally wrong (ethically is up to the individual I guess) It is the system, that sucks.

    I could not do it, but I value my credit :)
     
  5. Ace in the Hole

    Ace in the Hole Well-Known Member Premium Member

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    Exactly what I was thinking.
    Something or somebody will teach them a serious lesson one day.
     
  6. Scott No Mates

    Scott No Mates Well-Known Member

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    @moyjos - No different to anyone who actively structures their activities for the same purpose ie protection from potental creditors, ex-partners, children, consumers or general public who may have a claim.

    (Have seen a few where we've received a few % of what was lost).

    Do they intend to go back into the business?
     
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  7. moyjos

    moyjos Well-Known Member

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    I am not sure if he plans on going back into business. It was a pty ltd with them both directors. He is currently employed in the same industry. She has always done the hairdressing mobile and from home, which I am sure is not all declared .
     
  8. Biz

    Biz Well-Known Member

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    Get them to register on here so we can give them a roasting!
     
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  9. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    See all my tips on 'asset protection'. This sort of thing is very common - rorting the system. Many people intentionally don't pay creditors and intend to rip them off from the start.

    $60k pa is high and linking it to the pension would be good I think. They were silly by having both of them as directors. She could have stayed off and not gone bankrupt.

    The school fees could be clawed back I think and the grocery cards - but this is sort of like hiding cash under the bead and won't be detected unless they declare it.
     
  10. Xenia

    Xenia Adelaide Property Manager Business Member

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    Interesting
    I'm guessing business was running insolvent before the descision to declare bankrupt.
    Did they feel they were not able to trade their way out of it?
    Were they going backwards year to year? What made them decide?

    What was the business?
     
  11. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    My guess is that it was tax debt and/or personal guarantees.
     
  12. moyjos

    moyjos Well-Known Member

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    Business is glass/aluminium. They had a builder go bust on them and never really recovered. Rent on their she'd had not been paid for a while, leases on business Utes not paid, suppliers not paid etc etc etc There is a hefty tax bill in there as well.
    2 guys lost their jobs as well :(. I must ask her if all their super was paid up. I think it was, she has always been pretty vigilant with pays. She often (as we all do) that the guys get paid mor than they do.
     
  13. Xenia

    Xenia Adelaide Property Manager Business Member

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    Does this mean more clients for you moyjos? Can you take on their clients?
     
  14. MTR

    MTR Well-Known Member Premium Member

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    I would agree with you, but did you know that it is very difficult to prove legally that a business was running insolvent, grey area.
     
  15. MTR

    MTR Well-Known Member Premium Member

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    Terry
    I found out recently from an acquaintance that years ago if a business went into administration/bankrupt with outstanding ATO debts they were written off, however, it is now a personal liability, this is a recent change and I think a very good move.

    MTR
     
  16. Xenia

    Xenia Adelaide Property Manager Business Member

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    Is that right? Makes sense because there would be a lot of Australian businesses that would be running insolvent (debts above equity) if you look at it, it's not an area I know a lot about but finding this thread very interesting.

    An accountant friend of mine told me once that the ato turns its back on most insolvency issues.

    Do you know what criteria are for a business to declare bankruptcy?

    Surely it can't be that easy because as moyjos post points out, there seem to be some benefits there, not ethical ones, but legal ones which makes it attractive to people who are not investors nor have a desire for incorporating future corporations.
     
  17. Casteller

    Casteller Well-Known Member

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  18. MTR

    MTR Well-Known Member Premium Member

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    I guess if a business can no longer continue to meet their financial obligations ie to pay suppliers, employees etc then they will have no choice but to go into administration, unless they have adequate funds to pay out their creditors. No black mark on their credit rating.

    I am sure there are also many hard working business people who whatever reason may have gone into bankruptcy with no intention of ripping people off.

    MTR:)
     
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  19. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    A business is not a separate legal entity but what a legal entity does. You probably mean company - if a company goes down its income tax debt gets wiped out. However if there is unpaid PAYE tax then the directors of the company can be personally liable - similar for unpaid super entitlements of staff.
     
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  20. MTR

    MTR Well-Known Member Premium Member

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    Yes, I do mean company, thanks for clarifying this:)