Bankruptcy Cutting corners Big picture issues
A fair share of any joint assets or property
Leaving a relationship, marriage or partnership is rarely easy. Commonly, women in particular leave with the children and a smaller share of any assets, money or property, and in some cases, without anything.
This publication A Fair Share – Negotiating your property settlement may help.
If you are struggling with the costs of sending children to school, you are not alone. There are a number of organisations and resources available to help parents manage the costs of their children’s education.
Check out these resources
⦁ Understanding Parenting Payment Categories
⦁ State Schools Relief – excursions & uniforms
⦁ Assistance with IT – personal devices
To make it easier for you to locate the services available to help cover the costs of sending your kids back to school in 2017, we developed this reference sheet for the school year.
2017 Back to School Information Sheet
The idea of child support is a good one: both parents contribute to the financial cost of raising their children, even if the parents are not together. The reality is that it is not always simple, and is rarely conflict-free.
How it works
Separating parents can work out their own agreement if that suits them. Some single mothers find that works well, others struggle with irregular payments and arguments. There is no information about how many parents default on these payments.
If parents do not agree, child support is assessed and collected by the Australian government Department of Human Services (DHS) and is calculated using both parents’ incomes. The assessment often falls short of the real costs of raising a child or several children.
Payments are received by the Department, then transferred to the parent who has majority care of the children.
Centrelink requires the majority care parent (usually the mother) to seek child support payments either voluntarily or through the system, in order to receive Family Tax Benefit payments.
If seeking child support payments may impact on your safety, or the safety and wellbeing of your children, you should speak to a Centrelink social worker.
If you are not receiving payments you are entitled to, or payments are irregular and/or only partially paid, it can become difficult to meet your children’s expenses. It also makes budgeting and planning harder when payments are not being made on time, are reduced, or stopped without explanation.
If child support payments are not being paid you will need to inform Centrelink to ensure you are receiving the correct amount of Family Tax Benefit.
Links and phone numbers
Child Support: 131 272
DHS self service and online services website
Child Support Agency complaints line: 1800 132 468
For legal advice visit or call Victorian Legal Aid Child Support: 1300 792 387
Emergency relief is the provision of financial or material aid to people in immediate need. Assistance is normally available from local community organisations and can come in the form of pantry food, food parcels or material aid, food, transport, telephone or chemist vouchers, and financial help with budgeting or the payment of certain bills.
People seeking assistance may be in short or long term financial crisis, receive inadequate income support, have health or mental health issues or a disability, be homeless or at risk of homelessness, have suffered a loss of employment, be unable to find paid work or be socially isolated.
Community organisations can provide people with support and an opportunity to talk about their situation and receive appropriate referrals to services that can help address their long term needs.
CSMC can help in some instances with an unexpected debt, rent arrears and other costs. We are also able to refer you to other services that provide emergency relief. Call us to find what emergency relief you may be able to apply for.
Single mothers and others who find themselves in debt and can’t see a way to pay it, often consider or are told that bankruptcy is the answer. Would it work for you and do you understand its implications? Here are some things to consider.
⦁ Don’t panic and take your time
⦁ Make sure you understand how bankruptcy could affect your life
⦁ If you owe less than $10,000 to just one or two creditors, there are other options.
⦁ Get help, use the free resources available, then make your own decision.
What is bankruptcy?
Bankruptcy is a status a person enters, either voluntarily or involuntarily, if they cannot pay their debts from their available income and assets. The period of bankruptcy is usually 3 years and means that:
⦁ You do not have to repay debts you had at the time you became bankrupt
⦁ People you owe money to (creditors) cannot take action to recover debts from you anymore
⦁ A trustee is appointed and will try to use assets and property you have to repay your creditors
⦁ Transactions you have entered into just prior to your bankruptcy may be declared “void”
⦁ You will need to pay a proportion of income that you earn to your creditors for at least 3 years
⦁ An inheritance or other money you get during bankruptcy will likely be used to repay your creditors
⦁ The fact you have become bankrupt will be permanently recorded on a public register
⦁ You will not be able to do some things (e.g. obtain credit, holiday overseas) while you are bankrupt
⦁ If you own your home, or are paying a mortgage, you may lose your share of the house, and
⦁ After you are discharged from bankruptcy, you will have to disclose the fact that you have been bankrupt before to banks & other credit providers, as well as some professional associations, which may have long-term ramifications.
How do you become bankrupt?
To do this, you present a “debtors petition” to the Australian Financial Security Authority. ONLY do this after considering all your options and getting advice from a professional financial counsellor or one of the free services listed at the end of this article.
A creditor may “petition” for your bankruptcy if you owe a total of more than $5,000. This process usually starts with a creditor serving a “Bankruptcy Notice” on you, and ends with the court making a “sequestration order” and appointing a trustee to your bankrupt estate. You do not have to attend court but you are entitled to do so. You do not need to have a lawyer to attend court, but have to arrange it beforehand to get one free of charge.
What can you do if someone you owe money to threatens to bankrupt you?
First and most important – know that bankruptcy is not supposed to be used as a method of debt collection. Sometimes creditors send a letter of demand, or a notice that you owe them money. This is not enough to start the bankruptcy process. The creditor needs to go to court to obtain a “judgement debt” first. Bankruptcy is only appropriate in certain situations. Other ways of resolving a debt include negotiating a payment plan or applying to have the debt waived or written off on hardship grounds.
Alternatives to Bankruptcy
Under the Bankruptcy Act 1966, there are two formal alternatives to bankruptcy, called a “Personal Insolvency Agreement” or a “Debt Agreement.” Further information about these are at the Australian Financial Security Authority.
Other informal methods of managing debt, such as hardship registers, may help you deal with pressure from debt collectors, and support is available to access these free of charge:
⦁ National Debt Helpline
⦁ National Hardship Register
Be wary of advertisements offering “government funded” programs to help you get out of debt, or services to help you manage your household budget. They might be helpful but you will need to pay for them. If you are tempted to use My Budget, check out this story about a single mum who did.
You have the right to free, independent reviews of decisions about income support payments and other benefits. So, before you decide to become bankrupt because of a notice from Centrelink that you owe a debt, seek assistance from a specialist service to help you understand how much money you owe, and what steps you can take to deal with the situation:
⦁ National Social Security Rights Network
⦁ Social Security Rights Victoria
⦁ Victorian Legal Aid
You may also contact a local Community Legal Centre to discuss your situation and explore whether bankruptcy is the right option for you.
Is it worth it? Many single mothers struggle to work out whether it is worth paying for insurance policies for their home, their contents and their car. Many policies are unaffordable, with expensive annual premiums and high excesses if you make a claim. Most insurance companies prefer a single annual payment for the policy or offer monthly payments, which can still be expensive and impractical. These hints may help:
⦁ Financial Hardship
Many insurers have introduced measures to assist people in financial hardship. Most have monthly payments, which are better than a single yearly payment. They can also allow you to pay the excess off over a three or six month period. There are products being created to cater for people on low incomes and the insurance industry has a Code of Practice that includes a section on financial hardship.
⦁ Car Insurance
- Comprehensive insurance may not be worthwhile if your car is worth less than $7000.
- Third party insurance is better value for cars worth less than $7000. This covers the other driver if you have an accident and it is cheaper to get. Third party will not cover your car if you are at fault, which leaves you to pay for repairs or a replacement car.
- Third party insurance includes the Uninsured Motorist Extension that will cover your car for up to $5000 if you are not at fault and the other driver is uninsured.
- A new product called Essentials by AAI sold by Suncorp is like ‘comprehensive lite’. It allows you to insure your car comprehensively for up to $5000 with fortnightly payments to suit Centrelink recipients, and no excess on claims.
- If you are in an accident and you are uninsured or only have third party you should see your local Community Legal Centre. They can negotiate with insurers and lawyers and may be able to get you out a debt if you are in financial hardship. If you are currently paying for a vehicle accident where you were at fault, you should definitely visit a legal centre for advice.
⦁ Tenants and Contents
- Many tenants don’t insure their contents but with more low income families living in rural areas, there is a greater risk of losing everything in a fire or flood.
- There are now policies for tenants that allow you to insure for a lower amount or to cover just a few items like the refrigerator or electronic devices. Essentials is a good value and affordable contents insurance option.
- If you are a tenant and you have an accident with a fire in the kitchen or a flood in the bathroom or your ex-partner damages the property, seek advice from a Community Legal Centre. Many insurers will agree not to ask you to pay damages if they know you are in financial hardship.
⦁ Your home
- After a break-up, some women feel they cannot afford to continue to pay for insurance on their home. If you are in this situation, see a financial counsellor and find a way to pay for home insurance.
- If your home is damaged by a fire or flood you may be left with an expensive mortgage that is worth more than your property. This is a big risk!
⦁ Good Insurance
Good Shepherd Micro-finance has a Good Insurance program that works with Australia’s largest insurance companies to create affordable and simple insurance policies for people on low incomes. These products enable people to insure their household belongings or cars, so they are protected if things go wrong. If an insurance policy has been developed with Good Insurance, you know it has been designed for the customer, that it has affordable premiums with no or negligible excesses, and that there are flexible payment options available.
Essentials by AAI is an example of good insurance. It allows customers to comprehensively insure their car, their home contents or both. Premiums can be paid annually, or in monthly or fortnightly instalments, and Centrepay can be used to manage payments.
You are likely eligible for this and similar products if you have a healthcare card, receive Centrelink payments, or have a household income of $48,000 or less (excluding superannuation). You can find out about this product from Good Shepherd Microfinance.
Thanks to Denis Nelthorpe, CEO at Westjustice for providing this information.
Knowing your rights and sorting out your finances is a good survival step.
Check out these links:
⦁ Free financial counselling
⦁ Australian Competition and Consumer Commission to find information on credit, debt, banking and consumer rights 1300 302 502, 9am to 5pm, Monday to Friday
⦁ Wesley Mission Credit and Debt Hotline 1800 808 488, 9.30am to 4.30pm, Monday to Friday
⦁ MoneyHelp 1800 149 689, 9.30am to 5pm, Monday to Friday for tools and advice to help you manage your money and debt. This is a Victorian Government initiative
Use community knowledge
There is a lot of information about how to do things cheaply and without compromising health and well-being, from searching the internet free at the library, asking your grandmother or getting people’s best tips on cost savings such as:
⦁ Cleaning cheaply
⦁ Online banking – did you know you can spend nearly $500 in fees in an ordinary account? Many online options such as ING Everyday Banking have no fees and no ATM fees.
⦁ Food swaps – this is a starting point
⦁ Swapping goods rather than paying is taking off in Melbourne and you can get the idea from this article. Mostly groups like this use Facebook and some CSMC members use them regularly.
⦁ Freebies – did you know Gumtree has a freebie section?
Big picture issues
Helping single mothers have a secure income is a key priority for CSMC. We are committed to working with single mothers and other organisations for change, including:
⦁ Working to improve government payments and amounts that can be earned before benefits are lost
⦁ Encouraging products that are affordable (such as low cost insurance and childcare) and new ways of expanding or sustaining income
⦁ Campaigning for improved child support assessments and regularity of payments and
⦁ Helping the public, employers and politicians understand the financial challenges in single mother families