VIC Unsecured Debt, Bankruptcy or Not?

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sam ram

13 October 2014
Hi there,

Looking for all the help/guidance that might be out there.

My situation -
I don't have any valuable assets (car worth 10k), have 3 dependants (2 young kids and a wife who earns 11k per year), I am on a permanent residency visa (801). I currently earn 100k per year base salary exclusive of super. My current unsecured debt is 57k (2 credit cards with credit card debt and 1 personal loan).

I'm looking for advice on how to tackle this. With limited assets would bankruptcy be a good option? Or due to my salary would I pay too much to my trustee.

Could a Part 9 agreement be a possibility?

Keen as as many thoughts/advice as possible.


Sarah J

Well-Known Member
16 July 2014
Melbourne, Victoria
Hi Sam,

I would look into entering some sort of financial agreement with the credit company first. Bankruptcy is not a good option and may affect you in later years. It also means you cannot travel overseas for 7 years. You can think about declaring insolvency. However, I would suggest negotiating a payment arrangement first. If the company is unwilling to negotiate, you can contact the Financial Ombudsman Services for assistance.

Further, I suggest having a read of these threads that are already published on lawanswers:

- "Declaring Bankruptcy - Will I lose the house?"
- "Bankruptcy and My Income"

As well as other threads under the Debt and Bankruptcy Law Forum.


Dear Sam,

Bankruptcy is really only a last resort and should be considered very carefully. You also need to give careful consideration to entering into a part ix debt agreement, as it is akin to bankruptcy. Here are a few things you should know and think about.

To be declared bankrupt, you need to either apply to the court yourself or your creditor may do it in order to recover their debt. However a court has the power to refuse if they believe you are able to pay off your debt and you are simply trying to avoid it. The standard period of bankruptcy is three years, but can be extended on application by your trustee. Once you become bankrupt, a trustee is appointed to manage your debt, and all your property then belongs to the trustee. The trustee has the power to determine how your property can be distributed to your creditors to pay off your debts.

The immediate benefit of bankruptcy is that unsecured creditors cannot pursue legal action against the person. However a bankrupt is not released from the obligation to pay debts, especially child or spousal support, or Social Security debts. In addition, you will be responsible for any debt that you accumulate after you declare bankruptcy. As pointed out by SarahJ, you will be required to surrender your passport to the trustee, declare any gifts or windfalls, and you will need a court order to receive any payments from any financial institutions. You have to continually keep the trustee informed of all changes in your personal life, including a change of name or marital status etc.

Among the property that is available to the trustee to pay off debts, are:
• any property interests
• jewellery
• stocks and shares
• gifts from a will
• cash held in a bank account
• household fixtures and fittings
• money owed to the bankrupt.

Part ix debt agreements

A debt agreement is essentially a proposal of how you will pay your outstanding debts to creditors. If you enter into a debt agreement, it willbe on your credit report for seven years and is viewed as an act of bankruptcy. Therefore if your creditors decide not to accept your proposal they can apply to bankrupt you.

Part ix agreements can be expensive so be careful who you go through to get one. You will likely need to pay an upfront fee to an administrator in addition to a monthly administration fee throughout the duration of the agreement.

There are certain eligibility requirements to enter into a part ix. You must
  • You must not have been bankrupt or had debt agreement in previous 10 years;
  • Your unsecured debts must be less than $100,664.20,
  • You must have divisible property valued at less than $100,664.20;and
  • Your anticipated after-tax income for the next 12 months must be less than $75,498.15. (these figures change every year)
This option does however allow you to continue to manage your own financial affairs and hold positions such as company director, which you cannot when a bankrupt.

I would seek advice from a financial counsellor to explore all of your options.