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Pensioners' age and insolvency in Australia

Pensioners' age and insolvency in Australia
"""From time to time, I encounter pensioners whose lives have become unbearable as a result of credit card and other debt that is, in their estimation, overwhelming. Unless they leave themselves short, those on a pension frequently find themselves unable to make repayments.

Some of them have wept when they realized that bankruptcy can eliminate their debt and free them from their dreadful situation with dignity.

They are typically unaware that their bankruptcy will only last three years.

They all claim that they were unaware that, as bankrupts, the law allows them to earn a minimum of $758.80 per week net, after taxes, as weekly spending money, before it can be taken by their bankruptcy trustee.

The majority of men and women tell me they don't earn that much anyway. However, it is true that the law changes (upward) every March and September.

A pensioner of retirement age who receives a maximum pension of $537.70 per fortnight, or $268.80 per week, falls far short of this $758.80 per week figure.

As a couple, they can receive a $449.10 pension every two weeks, or $224.55 each per week, which is still significantly less than the $758.80 figure and allows them to retain everything.

This means that if a pensioner (who rents) goes bankrupt, they can stop paying their debts forever, including credit card and most other loans, and retain the entirety of their pension to buy food and support themselves.

If you own property such as a house or a vehicle, I will address that shortly.

Most, however, believe that this is unjust, as they were raised in an era where debts must be paid. In the past, banks and other lenders were also required to be more responsible when determining who to lend money to and how much.

Currently, there appears to be an imbalance of responsibility.

If, despite everything, you do not wish to declare bankruptcy, bankruptcy law has attempted to provide a solution. In actuality, the solution is generally out of reach for individuals living on a pension and perhaps a few additional dollars as well.

In terms of bankruptcy law, these solutions are referred to as either a Debt Agreement Proposal or a Personal Insolvency Agreement. Both could be a tad costly to establish for age pensioners. In addition, they tend to keep you burdened with your debt, a repayment plan that extends over a number of years, and pension deductions.

In addition, with the Personal Insolvency Agreement procedures (but not with bankruptcy), the fact that you are endeavoring to pay off your debt in this manner must be published in a local and national newspaper.

I cannot imagine many retirees, or anyone else, desiring to be humiliated in this manner, nor do I believe they should.

Moreover, if the wheels fall off again and something arises that makes it difficult or impossible to maintain the repayments, as is more likely as we age, then you're back in trouble.

If you do not wish to declare bankruptcy, then the law establishes a routine and procedure for you to attempt to have your repayments reduced or frozen for a period of time if you choose one of the other two alternatives. Additional expenses that do not go away.

After declaring bankruptcy, I believe you should voluntarily set aside what you can and when you can, and then whittle away at the debt at your own pace and in your own time if you choose to (but are not required to by law). Consider as similar to the proverb ""a dollar down and a dollar a week.""

However, nobody can compel you to do so, as bankruptcy eliminates the type of debt I'm referring to.

In the vast majority of cases, bankruptcy lasts for three years, and at the conclusion of this period, you are never required to pay back this debt again. Some shady debt collectors (and there are a few) may inform you that you do, but this is incorrect.

Age pensioners also benefit from the fact that their bankruptcy is not publicized anywhere in the media. It is highly private. If you declare bankruptcy, you do not have to appear in court.

However, your bankruptcy is reported to commercial credit rating agencies for seven years, making it difficult, if not impossible, to obtain credit or a loan from traditional banking sources during that time.

If you file for bankruptcy, your credit cards will be cancelled. However, some banks now offer Visa debit cards, which can only be used if you have sufficient funds in your bank account to cover the cost of your purchases promptly.

The government also documents your bankruptcy status on a database known as the National Insolvency Index, which is accessible to the public for a fee and is permanent. I don't see how this would be a problem for retirees.

The majority of age pensioners are also relieved to hear that they should be able to retain their vehicle even if they declare bankruptcy.

You may retain a vehicle if your (net) equity in it is less than $6,300, which is its wholesale value and not its retail price. Renting pensioners of a certain age are infrequently in possession of a late-model automobile, so this is almost never an issue.

If you are paying off your vehicle and have a Bill of Sale, the $6,300 net equity represents the portion of the vehicle that you own, as opposed to the portion that the bank or finance company owns.

Compare what you still owe on the Bill of Sale with what you believe a car dealer would offer you in cash, not as a trade-in, if you attempted to sell the vehicle to them today.

The theoretical difference remaining after you've repaid the finance company would signify your ownership stake. If it's less than $6,300, you should be fine.

However, if you're paying off your car in this manner, you must be current on the payments if you want to retain the vehicle if you declare bankruptcy.

Also, as an insolvent, it is unlikely that anyone will come to your home to remove your furniture and belongings. There may be a few exceptions to this rule if the bankruptcy trustee was informed that the debtor owned something extremely valuable, such as a Mona Lisa. Obviously, this is a bit of an exaggeration.

During the three years of your bankruptcy, the government can sell or seize items such as lottery wins or prizes of value (buy tickets in someone else's name), assets left to you in a will during that time, your interest in the family home, land, money in your bank accounts (but not your pension income discussed earlier), antiques or other saleable property that is """"of value"""" (the key phrase here is """"of value"""").

This is rarely a concern for pension-age individuals contemplating bankruptcy. You are generally left alone.

If the age pensioner possesses a home, this is a cause for concern, as the equity in the home generally allows the person to obtain a loan to pay off the debts discussed in this article. If I possessed a home, I would endeavor to avoid bankruptcy.

" - https://www.affordablecebu.com/

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"Pensioners' age and insolvency in Australia" was written by Mary under the Finance / Wealth category. It has been read 71 times and generated 0 comments. The article was created on and updated on 02 June 2023.
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