Good Government (Under Threat) Down Under

Australia has a bankruptcy system worth studying. Among other merits, it collects and publishes more facts about its system on line than any other.  http://www.itsa.gov.au/dir228/itsaweb.nsf/docindex/about+us-%3Epublications-%3Epublications?opendocument

Prior to 1996, Australia probably had the most sensible bankruptcy system in the world. Bankruptcy is simple enough there that people can file without paid professionals to help them. Rather than means testing that adds costs and thus bars destitute debtors at the threshold, Australia imposes a "surplus income" payment requirement on debtors who file in bankruptcy and have income above a relatively low threshold. Last year, just over 15 percent of Australian debtors had to pay something to get a discharge, while the rest of debtors weren’t burdened with a complicated "means test" to get into bankruptcy.

There is only one problem with this story; it was too good to be true. In 1996, Australia amended its law to create a "debt agreement" option. It sounded great; family members and neighbors would pitch in to help debtors negotiate with creditors to work out their debts and avoid the "stigma" of bankruptcy. But commercial debt administrators revved up operations to promote this option, and within a few years, they were charging hefty fees and getting a lot of poor people to use it. Well over half of those who proposed debt agreements failed either to get their proposals approved or to complete their plans. Sound familiar?

In 2007, Australia amended its law to regulate the debt administrators. But it is far from clear that this will be enough to keep debtors with no hope of repaying their debts from using this option. In the last two years, more was being paid by debtors using debt agreements than by those filing for bankruptcy,so eliminating the option became politically impossible. Debtors lucky enough to find their way into bankruptcy in Australia still get relief at low cost. The problem is the others, who get diverted by debt administrators and fail more than half of the time.

The broader point is that "confusopoly" is a great strategy if you want to keep debtors from getting a discharge of debts they have no hope of repaying. Even though they can't repay old debts in full, they pay a little more as they stay on the debt treadmill. Make a system more complicated, and more people will have no idea what is going on. Again, sound familiar?

Comments

[Glenn B]

If only you knew just how corrupt and corrupting the credit industry is in Australia, and that was before the advent of the international players like GE who have only made it worse. I owe AMEX AUD$5,000 and have done so for 25 years...why won't they come after me? Because I found them out paying off public servants to access my social security files, thus come to the court with dirty hands (and went for the cover up). I discover (by accident during a divorce back in 1983)just how much the credit industry was involved with corruption, falsify a credit file...no problems...bribe public servants...no problem, pay off police...no problems...employ thugs...no problems (unless the thugs come after a former Vietnam era Australia Army Jungle Warfare instructor)... (you should have seen the look on his face when surprised from behind with a baseball bat).

To sort these criminals out we needed a change in the federal laws to stop the falsifications of credit files...an Independent Commission Against Corruption inquiry, 150 arrested and charged...why? Because someone was late paying a miserable amount of debt while a divorce went through the courts...the drama caused by an angry wife's lawyer accessing a repeatedly falsified credit file..."I know what you have been doing, I've seen your credit file").

I was amazed at the level of corruption, where you cannot have a bank account in Australia without it being available to your enemies, a credit file without enemies trying "to get something on you" by falsifying credit applications, your phone records, AUD$20, Government Files AUD$30...all on a black market for informations established and financed by the credit industry.

In 1996 the "credit lobby" got at a government of less than honorable standard (OK lets just call them criminals)...in simple terms they were paid off, or frightened, by the corrupt of the credit industry. Most Australians would work themselves into a grave to avoid bankruptcy. Only the desperate apply, the reasons as expressed by the Bankruptcy officials...sickness, divorce, loss of job...simple human events.

Debt administrators? A joke...all they want to know is what they can scam off the top.

Australia had a system that worked for the downtrodden and desperate until a corrupt finance lobby got legislative influence in Australia, that has a lot to do with the influence of USA based companies with big pockets and corrupt politicians.

Having assisted and seen 150 of these SOBs arrested during the ICAC investigation into corruption and having a hand in drafting of the Credit File Act I can only say it hasn't got better.

It seems the corrupt rule thought deep pockets.

Glenn

[Rebecca Agar]

I`m a single mother living on the pension and im in alot of debt i am left with nothing each week please give me a call on 0401228635 ASAP, please ring me thankyou