Is the Gold Coast at Risk of Becoming a Bankruptcy Backwater?

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The Insolvency and Trustee Service of Australia (ITSA) this week released their annual statistics which reveal one in every 660 Queenslanders is a bankrupt, sourced by Debt Fix.

Last year across the country, approximately 23000 debtors either declared themselves bankrupt or were made bankrupt by their creditors.
In contrast, around 9000 debtor’s elected to raise a debt agreement proposal as an alternative to Bankruptcy

Inspector-General in Bankruptcy, Ms Veronique Ingram delivered the (now annual) personal insolvency report revealing bankruptcy data that some may consider startling.

The data accounts for the number of insolvent debtors per postcode in each state and territory, measuring the figures against the previous year and any increase/decrease.

As the data presents, it provides an opportunity to draw various conclusions about the financial position of our population per postcode and per state. For instance, whilst NSW had the most bankruptcies overall and hosted the suburb with the highest number of bankrupts per capita (namely Blacktown), Queensland outperformed every other state on an overall per capita basis. Indeed, the Gold Coast region stood out as an area unfolding as the nation’s personal insolvency regional capital. (Sourced from https://www.itsa.gov.au/resources/media-kit/media-archive/veronique-ingram-releases-personal-insolvency-by-postcode-2011-12, Media Release, Published Mon 29 April 2013)

The Queensland postcode that stood out most was 4211 with one in every 356 people insolvent; however, it was the frequency of Queensland postcodes featuring in the top ten which delivered the most sobering message. (Sourced from https://www.itsa.gov.au/resources/media-kit/media-archive/veronique-ingram-releases-personal-insolvency-by-postcode-2011-12, Media Release, Published Mon 29 April 2013)

Clive Palmer (billionaire businessman/politician) recently lamented that the Gold Coast had become a “backwater.” As a former Gold Coast native, this conclusion would have been difficult to reach, but in retrospect, Mr Palmer’s comments may not be too far removed from the truth, that is if the statistics are anything to go by.

A National Problem
Last year across the country, approximately 23000 debtors either declared themselves bankrupt or were made bankrupt by their creditors. (Sourced from https://www.itsa.gov.au/resources/media-kit/media-archive/veronique-ingram-releases-personal-insolvency-by-postcode-2011-12, Media Release, Published Mon 29 April 2013)

In contrast, around 9000 debtor’s elected to raise a debt agreement proposal (aka Part IX of the Bankruptcy Act 1966) as an alternative to Bankruptcy. In other words, 9000 debtors proposed to settle their debts via a Government Regulated program, subsequently approved by a majority of creditors, to deliver a satisfactory outcome and avoid the severe consequences that bankruptcy provides.

Grant O’Donnell, CEO and Director of Debt Fix (one of Australia’s largest Debt Agreement companies) said; “…the statistics are more than just numbers on a page. Each number represents a person’s real life and a story of desperation and sadness. Even though bankruptcy may represent a reasonable relief from the burden of debt, arriving at that conclusion or being forced into bankruptcy is never easy…”

Mr O’Donnell went on to say; “…Above all, I can’t help but feel sad about the incredible expense these bankruptcy figures represent in terms of the overall cost to the economy to say nothing of the human cost…”

Debt Agreements: A viable alternative

Mr O’Donnell went on to suggest that a percentage of the 23000 could well have sought relief from their debts through the debt agreement program, had they known about it.

“…In some overseas jurisdictions, where bankruptcy laws are just as sophisticated and regulated as ours, creditors actually assist their debtors by referring them to Debt Agreement (equivalent) Companies to explore their options in an attempt to reduce bankruptcy numbers and improve their own bottom line…”

In August 2009, Former Attorney-General Robert McClelland, said “...debt agreements usually recover about 76 cents in the dollar, whereas bankruptcy only tends to recover on average about 1.6 cents in the dollar. So there can be better outcomes all round...” (Sourced from http://www.abc.net.au/news/2009-08-25/mcclelland-calls-for-changes-to-bankruptcy-laws/1404842)

Setting aside for a brief moment the impact bankruptcy has on an individual’s personal wellbeing, the cost to the economy as a whole is tremendous, especially in the present financial climate when the economy needs all the revenue it can get. At a time when the Government’s principal revenue collection agency (ATO) are reporting revenue “write-downs,” it stands to reason the ATO would be front and centre when it comes encouraging increased receipts and limit the number of annual bankruptcies.

Grant O’Donnell says, “…the Federal Government has achieved a tremendous amount via its focus on improving Financial Literacy and its Moneysmart initiative and through its billion dollars funding increase to community support programs. This said, it would be terrific to see more debt agreements as an alternative to bankruptcy…”

From another perspective, the data issued by ITSA identifies postcodes and suburbs and in the process, potentially brandishes those affected regions with the stigma of being hubs for insolvency. Accordingly this may have the subsequent impact on property values in those areas identified and ultimately perpetuate the affected regions demise in terms of capital improvements and standing.

Unless government intervenes and does more to stem the tide of bankruptcies within the identified affected regions, the result could be a rise in “slum” suburbs, tarnished as high-risk bankruptcy capitals and left behind.

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Nicholas Bregozzo
Debt Fix
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