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Bankruptcy - Create a Holistic Solution

It is a common view for people to think that declaring bankruptcy is what you do to extract yourself from debts which you are unable to pay. Whilst these people are correct, there is more to it than that. We would like to discuss today; the outcomes we believe you should be striving to achieve in addition to filing for bankruptcy. To get the best results from bankruptcy we recommend that you seek to tick off all the boxes below.

We will discuss each of these topics and then give you an example to demonstrate your opportunity.

1. Health Check

Bankruptcy is an incredible opportunity allowing you to hit the reset button, giving a fresh start by removing most, if not all your debts. It is our recommendation, to maximise the benefit bankruptcy can give, that you take a step back, and consider what repairs and maintenance you need to do for all parts of your life. Take some time to watch out for your health and wellbeing and get that Doctor check-up to give you the best opportunity for your new life. Stress can cause physical health, mental health, and relationship problems. It can also destroy your lifestyle and quality of life. By being attentive to your health and wellbeing you will achieve so much more from filing for bankruptcy in Australia. We recommend that you read our article Are You OK which gives our view and recommendations on what you should be doing to get the best result as you resolve your financial problems.

2. Creating A Debt Free and Secure Life

Bankruptcy solves the problem that is front and centre on your mind – it removes the liabilities that you just cannot pay. Bankruptcy does more than removing the debts that you cannot pay, it gives you the opportunity to return the core values of ‘certainty’, ‘safety’ and ‘security’ to your life. We recommend you read our article Hitting The Reset Button – What That Means For You which explains how bankruptcy does not just remove your debt, it also gives the opportunity for you to have a more secure life.

3. Review How You Would Like to Change Your Life

Time and time again when we talk to people who have filed for bankruptcy, they tell us about the changes they have made in their life to give them a better future. Some examples of changes people have made include; to no longer having a credit card, not being a company director again, finding happiness, not guaranteeing other people’s debts etc

We highly recommend that you find some quiet time, pour yourself a cup of tea and think about what factors contributed to your financial pressure, and what changes you will make to stop that happening in your life again. Please have a read our article Bankruptcy – Better Outcomes in Your Life which covers this topic and gives some examples of changes people have made to improve their lives

4. Creating a Better Lifestyle

All too often when people seek the protection of bankruptcy, they are very stressed, and the financial pressure is causing strains on other aspects of their life. For example, having trouble sleeping, medical problems, work problems, relationship problems, socialising less and depression is common. It is important to not underestimate the danger that severe financial problems can expose you to. It has the potential to destroy all aspects of your life and be life threatening.

When we say ‘Bankruptcy Saves Lives’ we are very serious. Make no bones about it severe financial stress does fester and build to potentially be life threatening.

In addition to having bankruptcy remove your debts think about how you can change your life to remove stress and improve your happiness. It is a common problem that with financial pressure, people often get into a rut and a very different lifestyle to what they had previously lived. If you feel this is what has happened to you, take comfort in the fact that it is a common symptom from financial stress.

We always recommend to people we talk to that they find some time to think about how their life has changed or is in danger of changing. We ask you, what changes have occurred in your life due to due to stress from the financial pressure? What can you do to make your life better?

We would like you to read our article Worth Thinking About which covers this topic.

5. Creating the Ability to Plan for The Future

When you become bankrupt, not only are the debts gone but the pressure to find the money you do not have also goes. This gives you the opportunity to start getting on top of your finances and take control. The first box to tick is to make sure that your life essentials are covered. Before you do anything else, make sure you are across your electricity and gas bills and payment of your rent or mortgage. Top priority is to have a roof over your head and utilities in place. We recommend that you read our article How to Move On From Bankruptcy which covers this topic and can be accessed here.

Once you have your life essentials covered it is then time to think about rebuilding. Take time to look at your wages and itemise the bills you will have to pay. We are loath to say prepare a budget as so many times we have seen budgets prepared that are like works of art to only sit on the fridge and never be used. You need a budget or plan that is simple and works easily for you. You do not need to pay for anyone to manage your money for you. We recommend that you read our article Budgeting Your Way To Financial Success, which can be accessed here. This article gives you a simple way to manage (budget) your wages and hopefully, there will be a little bit of money left over for you to save for a rainy day. 

Ok, you have your rent and utilities covered, you are budgeting to make sure you have the money to pay your bills as they come in and now we would like to touch on having you think about what you can do to start managing and improving your credit record. We are now starting to think about your future.

The best way to think of your credit record is to think of a conveyor belt. What goes on your credit record (conveyor belt) stays there, travelling along till it drops off in five years’ time. Very often, people who file for bankruptcy have many defaults on their credit record and when they file for bankruptcy, bankruptcy also goes on their credit record. The conveyor belt travels along and when each default reaches five years, it drops off the conveyor belt. So, if you become bankrupt and do nothing, in five years’ time you will have a clear credit record.

However, the good news is that you can start creating a positive credit record as you become bankrupt. Remember, the defaults drop off after five years so once you become bankrupt it is time to purposely work on creating positives for your credit record They will remain on your credit record after the pre-bankruptcy defaults have dropped off. You can do this by having utility and telephone accounts in your name and making sure that the bills are promptly paid on time. Also, making sure your rent is always paid on time. This is why the budgeting we just spoke about is so important. We recommend that you read our article How to Improve Your Credit Score When Bankrupt This article gives you greater insight on what to watch out for to improve your credit report.

6. Creating the Ability to Achieve Positive Financial Outcomes in The Future

For most people, once you become bankrupt your biggest assets are your wages, your ability to save whilst bankrupt and your superannuation. When you combine this with the fact that your debts are gone, bankruptcy becomes quite powerful. We would like to suggest that the relevant question for you, once you become bankrupt is what will your financial position be once you are discharged from bankruptcy in three years’ time?
The easiest place to start thinking about this is to look at your superannuation. The superannuation you have accumulated over time from your employer paying Statutory Super Contributions is protected and not available to your bankrupt estate. Likewise, whilst you are bankrupt, the Statutory Super Contributions that your employer pays to your super fund during bankruptcy is also protected for your retirement. Further, any growth in the value of your super fund whilst you are bankrupt is also protected and not available to your bankrupt estate.

That is superannuation out of the way, so now let’s look at savings. Any money you save during bankruptcy is protected, provided it remains in your bank account. Your savings cannot be put into any other account, they must remain in your bank account. So, if you have created a budget and you have $30 left for savings each week and you save $30 for the three years of bankruptcy, you will have $4,680 in the bank when you are discharged from bankruptcy and that money is yours.

If you were to get the opportunity of a higher paying job and could save $100 per week, you would be discharged from bankruptcy with $15,600 in the bank and also the Statutory Super Contributions your employer pays to your super fund during bankruptcy will increase due to your higher wages.
It is important for you to see the opportunity bankruptcy provides and for you to look at your own circumstances to decide how bankruptcy can work best for you.

Lets look at an example to demonstrate the opportunity bankruptcy provides for you to create strong financial outcomes to give you a great platform to go forward from once you are discharged from bankruptcy.


David and Sue had credit card debt and personal loans that they were finding difficult to repay and could not see a way out. Their debts totalled $215,000 between them. They were advised to file for Bankruptcy. They filed for bankruptcy, obtained a bankruptcy number and their credit card and personal loan debt were gone, but this was only part of their solution.

Other parts of their solution were;

They booked an appointment with their Doctor for a check up to make sure there were no medical consequences from the stress they had been through.

They made sure their utility bills and rent were paid up to date and on time to give them financial security and to start rebuilding their credit record.

Sue and David then thought about things that they would like to change in their life and what they can do differently to prevent being caught by insurmountable debt again. They both agreed to have no more credit cards would be a big step forward for them.
They then thought about what they could do to reduce their stress. They had without realising it, lost a lot of their lifestyle that had given them much relaxation prior to the financial stress building up against them. Sue started to get back into her book club and the local drama society. She had stopped going to them to save money. David paid his money to re-join his local soccer club and started to get back into his cross country running. He had given up his sport as he was always feeling too tired. David and Sue also made effort to reacquaint with their friends as they had socially withdrawn due to not being able to afford to go out.

Bankruptcy had greatly assisted them to reduce their stress and improve their quality of life.

They thought about their future direction in life and decided that they would like to start saving for a deposit for a house without putting themselves under financial pressure. They realised bankruptcy had given them a big opportunity by removing their debts.
Sue earned $85,000 per year and David $55,000. – During bankruptcy Sue payed small income contributions whilst David’s wages were totally protected. Bankruptcy protected close to all their wages so as they could live and save.

Sue had $45,000 in super and David had $28,000 when they became bankrupt, giving them superannuation savings between them of $73,000. – Bankruptcy protected Sue and David’s super.

Bankruptcy also protected Sue & David’s cars and household furniture.
Bankruptcy gave Sue and David a great platform to budget and start working towards their financial future. They budgeted to save $23,000 per year towards their house deposit whilst they were bankrupt. They also took comfort knowing that Sue’s employer was paying statutory super of $8,075 to her super fund each year and David’s employer $5,225 to his super fund each year.

They had their plan to be financially secure, live healthier lives and save a deposit for a house whilst they were bankrupt.

They used bankruptcy to turn their lives around. Their plan was to go from having debt of $215,000 to being discharged from bankruptcy in 3 years’ time living a healthy lifestyle, being debt free, having $69,000 towards their house deposit in the bank and having superannuation savings between them of $112,900.

The good news is that they achieved their plan. What a turnaround not only did they change their financial fortunes but also achieved a good lifestyle and wellbeing.
If Sue and David had not utilised bankruptcy, in three years’ time they would have still been in debt, with no savings and under significant stress causing them all sorts of problems.


Bankruptcy is not just about getting rid of the debt it is also about where you want to be in the future and the lifestyle you want to live.

We hope this article has assisted you. We are here to help you understand Bankruptcy. If you would like to discuss your situation give us a call on 1300 764 197 or email