Additionally, bankruptcy is not an absolute last resort that must be avoided at all costs.
If a person has what they perceive to be overwhelming debt, and they have attempted to control it but have been unsuccessful, declaring bankruptcy is a very practical and sensible measure to take. Primarily, it enables a person to get out of debt, giving them the opportunity to start over, regain their footing, and move on with their lives.
The phrase 'Stigma of Bankruptcy' is obsolete. In the past, it was likely to be avoided at all costs, but nowadays it is rarely a problem.
During the 'Stigma of Bankruptcy' era, Australian banks had strict and conservative lending policies. You were required to at least meet with a Loans Officer in person.
In those days, the majority of insolvent individuals were business owners. When a business abruptly ceased, it was evident that something had occurred. Everyone knew, everyone was talking, and the 'Stigma of Bankruptcy' hung heavy in the air.
Currently, banks have altered their practices. Online and over the phone, loans are made. Pre-approved loan offers are mailed out. Simply, the lenders have altered the norms and risks.
Now, common individuals go insolvent. During the fiscal year ending 30 June 2007, there were 25,242 bankruptcies in Australia, of which only 4,821 were business-related. The remainder were average citizens.
In the five years preceding 30 June 2007, 111,176 individuals declared bankruptcy (http://www.itsa.gov.au/about-us/statistics).
Some of these 111,176 individuals might reside on your street. You may sit next to them on the bus, tram, or train on the way to work, and you may know them at work and through work. You would be astonished if you knew who has declared bankruptcy.
There is a likelihood that you know more than one of them. Did the 'Stigma of Bankruptcy' prompt you to initially suspect that they may have declared bankruptcy?
In addition, did you read about any of the 111,176 individuals who were declared bankrupt during those five years? Check the Public Notices section every day to understand what I mean. Since bankruptcy is extremely private, newspapers will not be the source of a person's 'Stigma of Bankruptcy' concerns.
Neither will you have seen it on television, unless it involved a prominent and newsworthy individual.
Those to whom you owe money will be the first to learn that you have declared bankruptcy. Your bankruptcy trustee will inform them; you are not required to do so.
Your bank may not be informed. Where does the return address for credit card statements contain a GPO box?
If a person declares bankruptcy, I believe the true 'Stigma of Bankruptcy' lies with those who are owed money. It appears that the banks, etc., do not want to be caught with the stigma of having to report to their shareholders and thus to the general public, including their competitors and peers, that the management has lost some of its shareholders' money by lending it to individuals who could not pay it back.
If a person declares bankruptcy, unless they have something of value that their bankruptcy trustee is permitted to sell (there are restrictions on a trustee in this regard, as there are many things he cannot handle), the creditors will likely not receive much, if anything.
If a person declares bankruptcy, for the next three years they must earn a minimum of $758.80 per week (as of 1st January 2008) after taxes, child support, and business expenses, before the trustee can claim any of this income.
The base amount of $758.80 is altered twice a year and is increased if the bankrupt has dependents. If a bankrupt earns more than the base amounts (known as the Threshhold), they can retain half of whatever amount exceeds the Threshhold, in addition to the minimum $758.80 or whatever amount is applicable.
During the (typical) three years of bankruptcy, a bankrupt's weekly allowed income is unlikely to cause stress or stigma.
Creditors, banks, and others will experience the 'Stigma of Bankruptcy' when a debtor declares bankruptcy.
After a few months of falling behind on loans, credit cards, and other obligations, a person begins to appear somewhat shaky from a debt collection standpoint.
Currently, it is common practice for creditors to resell potential bad debts to companies prepared to purchase them at a substantial discount. The buyer is then responsible for collecting payment, and as far as I am aware, when they do, they retain the entire amount.
Thus, it appears that banks and other financial institutions are not required to report the sale of these debts at a loss as problematic debts. Saves dignity and reduces stigma.
The purchasers of these debts, who are now second-hand debt sellers, will incur a loss if the debtor declares bankruptcy and they are not paid.
In order to avoid losing money and the stigma associated with losing a wager, debt collectors who sell second-hand debt may employ aggressive debt collection strategies.
They assert erroneously that bankruptcy is a last resort, and they seem to go on and on about the 'Stigma of Bankruptcy'. But this is hardly a problem.
Generally, a person is insolvent for three years, and their credit rating is negatively affected for seven years. For the vast majority of individuals, bankruptcy has no effect on their employment.
Predominantly, bankruptcy does not prohibit international travel during the three-year bankruptcy period. Simply request written permission from your bankruptcy trustee. Again, in contemporary times, bankrupt individuals experience very little stigma.
Through bankruptcy, the government has given everyone the opportunity to get out of debt, to start over, to regain their financial footing, and to move on with their lives if they have attempted everything but are unable to pay their debts.
The 'Stigma of Bankruptcy' is insignificant.""
" - https://www.affordablecebu.com/
