FCA Releases “Too Poor to Go Bankrupt”
22nd June 2014 – Financial Counselling Australia has today released “Too Poor to Go Bankrupt: The Impact of the New Fee for Lodging a Debtor’s Petition”.
The report describes the results of a survey of financial counsellors about the impact of the $120 fee for lodging a debtor’s petition for bankruptcy that was introduced on 1st April 2014 by the Australian Financial Security Authority. The survey covered the first month of operation of the fee, from 1st April 2014 to 30th April 2014.
- 103 financial counsellors attempted the survey. We estimate that over the month of April 2014, this group of financial counsellors assisted around 300 clients who were considering bankruptcy.
- The large majority of financial counsellors (63%) said that “none of their clients” were able to pay the fee immediately. 30% of financial counsellors said that some of their clients could pay the fee. Only 7% of financial counsellors said that most or all of their clients could pay the fee immediately.
- For clients who could not pay the fee immediately, the survey set out five possible strategies that clients might consider: “use emergency relief funding in some way”; “wait until they can save the money from their own sources”; “borrowing money from family or friends”; “will use a credit card or payday loan”; and “unable to go bankrupt in the foreseeable future”.
- Financial counsellors in the sample reported seeing clients in all categories. 56 financial counsellors said they had seen clients who were “unable to go bankrupt in the foreseeable future”. The most common strategy was to “wait until they could save the money from their own sources”.
- The large majority of financial counsellors said that 50% or more of their clients had a healthcare card or pensioner concession card.
Although there is only one month’s data, it is clear that the fee is having a detrimental impact on a large number of people – in exactly the way consumer organisations predicted before the fee was introduced.
Financial counsellors: community-based professionals providing information, support and advocacy for people in financial difficulty.
Anyone who is in financial difficulty can contact a free and independent financial counsellor on 1800 007 007 or visit www.debtselfhelp.org.au.
For comment please contact: Fiona Guthrie 0402 426 835