Car Insurance Comparison – Home, Life, Business & Travel Insurance Quotes

THE STIGMA OF BANKRUPTCY

For many years, going bankrupt has had a horrible social stigma attached to it. People who went bankrupt were shunned like lepers and it was embarrassing for others to be seen in their presence. Today, bankruptcy is more of a private affair, as the social environment has changed and news of your bankruptcy no gets passed around quickly on the street. Nevertheless, the stigma is still unavoidable when your colleagues become informed.

There are many negative connotations that are placed upon a bankruptee and their way of life. The most obvious would be the assumption that they can not handle their finances properly, whereas this is not always the case. Many bankruptcies are caused by illness or other reasons unrelated to the handling of money.

The stigma is most prevalent in the business community. Since business involvement is linked to financial success, a bankruptee is considered a failure in business circles and someone to be avoided. If another businessman were to be involved with a bankruptee, others would be reluctant to deal with them upon gaining this knowledge.

It is an almost childish association that our society continues to invoke. Just like the school days where if you were friends with the person with bad body odour, it was naturally assumed that you suffered from the same affliction. Today, if you are associated with the ex-bankrupt, it is also assumed that you are also a failure in financial matters.

BANKRUPTCY EFFECTS

Bankruptcy isn’t just a magic formula that removes all monetary liabilities. There are repercussions in making the decision, of which many will be ongoing for a number of years after the minimum 3 year bankruptcy period has ended. Some of the issues facing bankruptees are:

• A personal income cap threshold will be enforced during bankruptcy; of which the bankruptcy trustee will be entitled to claim a 50% portion of any income earned above the cap. The threshold is set relatively high; ensuring the majority of people will never be affected. It is also adjusted bi-annually to allow for inflation, as well as being increased if the bankruptee has dependants.

• Loans will be virtually impossible to secure whilst undischarged from bankruptcy. After being discharged, the bankruptcy will remain on the persons credit file for a further 4 years. During this period, most banks will outright reject applications for unsecured lending products such as personal loans and credit cards. Loans backed by security such as cars and houses will still be possible, although the lenders may impose stricter approval conditions such as higher loan deposits.

• Overseas travel could be affected. Although the bankruptcy does not strictly enforce a ban on travelling overseas, it does have restrictions, and permission needs to be sought from the bankruptcy trustee before travelling. In some cases, the trustee will request you to hand in your passport when becoming bankrupt.

• Major assets will be lost and any assets aquired during the bankruptcy period may face the same fate. Any investment properties, shares, boats and other investments will be sold to pay back your creditors. If you have an expensive car, that will disappear too, as only cheap cars are free from the asset sale. Your house of residence may be sold depending on how much equity it contains and whether it is jointly owned. However, superannuation can not be touched by the trustee unless you have used it to stash your assets pre-bankruptcy.

• Bankruptcy law requires you to reveal that you are presently an undischarged bankrupt to all business partners. If you operate under a trading name, you must disclose this fact to all parties that you have financial dealings with. The ATO must also be advised so they can separate pre-bankruptcy GST from the post-bankruptcy amounts.

• Future employment opportunities will be limited, as a large number of jobs require licences; even for simple roles such as car salesmen or security guards. Being an undischarged bankrupt will prevent you obtaining most licences. Any jobs involving handling of money will be difficult to obtain, and you will also be prevented from being a director of a company without special court approval.

• Everyday home comforts will be more difficult to secure. To get basic utilities such as water, power and the telephone connected at your residence, you may be required to pay an upfront bond. Insurance may also be hard to get or renew.

• Your details will remain on the public record forever and some of your information will be available to be searched by the general public. Whilst bankrupt, you will have to obtain permission from the courts to hold certain public positions. Additionally, you will be unable to continue most legal actions or take them while being an undischarged bankrupt.

RISING FROM THE ASHES

After biding your time through the bankruptcy period, it is clear there are still lingering effects after being discharged. Fortunately, you are not branded with a mark on your forehead to advise the public that you have previously been bankrupt; although there may be internal scars that will never heal. But does a bankruptcy mean that your dreams of being a financial success are gone forever?

The bankruptcy stigma may be hard to shake, but there have been a number of people who have managed to become financially successful after being bankrupt. We only need to consider their examples as what can be achieved after bankruptcy as proof that it is certainly possible to escape the stigma and become a success.

Donald Trump is one of the more high profile ex-bankrupts to have rebuilt his empire. Like many other businessmen, he has used his misfortune as a learning experience and taken lessons from it, rather than sulking about for the rest of his life.

Even the notorious Alan Bond has recovered from his financial troubles, and in 2008 was named in Business Review Weekly’s Rich 200 list, with an estimated wealth of $265 Million. BRW has stated that Bond’s fortune estimate was ‘conservative’, so it has the potential to rise even further in the 2009 list figures.

Trump and Bond were both successful businessmen before their bankruptcy, so they had the knowledge and contacts to rebuild their empires after being discharged. But, there are also many individuals who have made their fortune only after finding failure first.

Walt Disney is a classic example. After losing $15,000 of investor’s funds in his first animation company, he went bankrupt in 1923. Although unlike Bond, Disney didn’t hide behind the bankruptcy forever and went on to repay his investors after hitting jackpot of success with Mickey Mouse.

Individuals who have fallen hard on financial difficulties shouldn’t despair over a potential bankruptcy. They should gain inspiration from the stories of people who have risen from ashes and found success in life.

THE GREAT AUSTRALIAN DREAM

Home ownership is heavily promoted as being the great Australian dream. All throughout school we are force fed this belief along with numerous others such as ‘Study hard and you will get a good job’ or modern day values like ‘save the environment’ But do these teachings hold true in the real world?

Most of the super-successful Australians never even finished school, let alone studied hard. Many of the highest paying jobs are in the building and mining industries, where brawn and common sense are preferred to academic success. Not to mention the huge numbers of university graduates who cant even find work. It seems that ‘study hard and you will get a good job’ was an outright lie.

The modern day saving the environment campaign was based on the presumption that the world was heating up. They coined the phrase ‘global warming’ to describe the phenomenon. The theory was shot to pieces when in the last few years the world temperature has dropped; so they conveniently renamed it ‘climate change’. Similar to the ‘global cooling’ lie that was perpetrated in the 1970′s, the public are ready to accept any theory as fact as long as the seeds are planted while they are at school.

When the evidence for the belief system instilled at school is examined to determine its truthfulness, it overwhelming shows that the beliefs are false. But what about owning your own home? Surely there can’t be anything bad about that.

PRISONER INSIDE YOUR OWN HOME

Gone are the days of housing affordability. Housing prices have gone through the roof and housing affordability is at its lowest levels in Australia since the index started being recorded. Additionally, the purchasing price of a home should not be measured solely in monetary terms, but also in its true value of its effect on your life.

It is no longer possible to save up and purchase a house outright. Bank loans are essential to own your first home. Whilst the home loan is initially spread over a 30 year term, in reality it is generally much closer to 50 or 60 years to due the inevitable refinances over the years. Home repairs, renovations, extensions, improvements and even other purchases such as cars and holidays are usually tacked onto the loan once equity is established.

You don’t need a degree in mathematics to work out the average age of a homebuyer once they have paid off their home. If a first homebuyer is aged 25 and the retirement age is 65, considering the abovementioned real home loan term lengths, the average homeowner will die before they are able to pay off their home. Is it worth working like a slave all your life chasing this elusive dream?

WHOSE DREAM IS IT ANYWAY?

As the reality of owning a home slips further into the netherworld, we need to analyse just who is promoting this fantasy and what are their true intentions. Certainly the government is acting through the education system to reach the minds of schoolchildren while they are young and vulnerable, but for what purpose?

Generations of honest, hard working Australians striving to own their own home: sounds like a good plan. The public will stay off welfare support and pay high levels of tax from their jobs. Additionally, home ownership generally equates to an individuals feet becoming firmly planted in Australia; rather than someone who skips the country for greener pastures after the government has spent thousands in educating them. The financial benefits of home ownership are great for the Australian government, but what about the social consequences?

Many of the traditional cultures have a strong set of family values at their core. This is still evident in many of the Asian countries today, where families share a strong bond from growing up together in a limited space. These family values are severely lacking in Australian society, where children move out of home at a young age and it is the norm for every person to have their own room in a house.

In Asian countries, children will sleep in the same bedroom as their parents. Grandparents are not thrown into retirement villages, but instead live with their children and grandchildren in the same house. When a son or daughter is married, they do not move off elsewhere, rather preferring to build an extension to the family house and stay in close proximity.

Many experts link these simple values failing to be attained from the home environment to the degradation of society; to the point where rapes, murders, theft and thuggery are all common place. Separate home ownership needs to be considered not just from the monetary point of view, but from the potential social damage it may be responsible for.

WILL YOU REALLY EVEN OWN IT?

Owning property means that it is yours: at least that’s what the Australian government wants you to believe. The true reality is that the government actually retains ownership of the land and you rent the land on a peppercorn leasehold basis.

As depicted in the great Australian movie classic ‘The Castle’, we are living under a false assumption that the land can ever be considered ours. The government purports the power to be able to take our ‘home’ from us at any time and for any purpose that it sees fitting.

Then there are the courts, which have a long history of ‘stealing’ property for frivolous reasons. Local councils also stamp their authority over the homeowners, even though that authority has been revoked through referendums which deem council rates to be illegal and unenforceable. If you have to pay a fee for the privilege of owning your home, should that really be considered as true home ownership?

Yet even after considering all these factors, many Australians will continue to believe in the impossible dream.

TOUGH TIMES

The global financial crisis has put numerous Australians under extreme financial strain. People are losing their jobs, getting lower working hours and receiving pay cuts. Business owners are seeing their profits shrink as customers and sales decrease. Overall, most people are now having to get by on less income. They can no longer maintain the same lifestyle and afford the same expenditure.

The people under the most pressure are the ‘debt junkies’. This is a term coined to describe people who are addicted to using credit to fuel their Hollywood lifestyle and material desires. Debt junkies are known for their ‘I want it now’ attitude and are constantly living above their means, with expenditure exceeding income.

When you are spending more money than you earn, you naturally get further and further into debt just to survive. A drop in income can have disastrous consequences and lead to the inevitable feeling of the world crashing down upon you. The inevitable has finally caught up with the debt junkies and the moves they make today will define their future.

Unfortunately, financial pressure does not limit itself to the debt junkies. There are a number of other groups who are presently experiencing problems. People with very low levels of debt, but are out of work for an extending period of time also fit the bill. Of course they prioritise spending on the essentials such as rent and food, often leaving personal debts unpaid so they can put food on the table.

Businesses too, are not immune to cash-flow difficulties. Rent and supplier payments take precedence over lending expenses. Often businesses may attempt to renegotiate their debt arrangements, but are met with stern resistance from the lenders, as the lenders are also experiencing financial hardship.

THE BANKRUPTCY SITUATION

When the creditors being on their backs are too much to handle, many Australians turn to bankruptcy as a solution. This current financial quarter could see the most personal bankruptcies in history. The first 3 months of 2009 saw 7,164 personal bankruptcies, which fell just 5 short of the record amount of 7,169 recorded in June 2001.

Whilst the economic situation is partially attributable to these figures, another factor is the increase in Debt Mediator firms. The competition in this market segment is hot, with an increasing number of companies looking to profit from the financial misfortune of others. The Reserve Bank has recently reduced interest rates to weather the storm, so we are yet to see the full impact of the global financial crisis and ensuing bankruptcy levels.

Debt Mediators receive a fee for each bankruptcy application they process, so they have a vested interest to promote the bankruptcy cause and advise that it is an acceptable solution to the public’s financial dilemmas. The public have been easy prey in this area, with an astounding 80% of all bankruptcies being personal and just 20% business related.

Statistically, half of bankruptees owe less than $20,000, with a large number of these for just a few thousand dollars. These are not significant amounts that would cause severe financial hardship and undoubtedly proves the point that bankruptcy is being promoted as the best option to solve debt problems, when in fact it is not always the case.

IS BANKRUPTCY THE ONLY SOLUTION?

When money is low and life gets too tough, do you throw in the towel or keep on persevering? This is the dilemma facing thousands of Australians at present. Bankruptcy is always a word on the tip of the tongue of a struggler, but of course there must be another way. So what are the options for an Australian who can no longer make ends meet?

Surprisingly, there are a number of reasonable alternatives before rushing into bankruptcy. Lenders are always willing to enter into debt agreements, rather than force the borrowers into bankruptcy. Quite often bankruptcy will mean that the lender receives nothing in return, as the borrower does not have any assets of reasonable value; hence their willingness to enter into arrangements, even for a small regular payment.

• 3 month no payment clause – Often unheard of and definitely unpromoted is the fact that under Australian law, loan contracts must contain a clause where the borrower can delay payments on their loan. The payments can be delayed, without interest, for a period of up to 3 months. Simply invoking this clause could save many Australians from financial heartache.

• Debt capping through Baycorp lodgement - If a borrower does not care about the state of their credit rating, they have another option up their sleeve to help reduce their payments. If they do not make any loan payments for 3 months, the debt will be lodged with Baycorp Advantage. After lodgement, the debt is set at a fixed value and can no longer increase from interest charges or late payment fees. This is a valuable option that is even promoted by the lenders in some instances.

• Debt agreement through Debt Mediators - Apart from the bankruptcy itself, there are other arrangements, such as debt agreement and personal insolvency agreements, which can be organised through debt mediators. Like the Baycorp lodgement option listed above, debt agreements have the benefit of fixing the debt value. Often the value will be set at a small percentage of the total debt, allowing a borrower to pay back just a portion of their debt whilst escaping bankruptcy.

• Loan Refinancing - For old loans, the borrower may be able to have them refinanced. For example, in the case of a five year car loan that has just two years worth of repayments remaining, it may be possible to refinance the loan over a five year period again. The benefit of this option is a substantial reduction in the minimum monthly payments, with two years of loan payments being spread over five years.

• Negotiating with the lenders for reduced payments - Under Australian law, the creditors have a duty of care obligation to ensure that they cater the debt repayments to the needs of borrowers experiencing financial hardship. A simple phone call or letter to the lender requesting that payments are reduced for a period of time until you get back on your feet, should be sufficient in the approval of a temporary payment reduction.

Australians have numerous alternatives to bankruptcy at their disposal, but for many people, a change of mindset is required to embrace these alternatives. The best option is to always discuss any financial difficulties with the lenders before considering other options such as bankruptcy.

THE BLAME GAME

The world financial crisis has reared its ugly head, bringing with it a lot of finger pointing. In typical western society fashion, nobody was prepared to foster any of the blame and everyone was looking for a scapegoat for the collective misery of society.

This finger pointing behaviour is an ugly trend itself. You only have to look at the amount of extreme litigation that is present in western societies, where the act of suing your neighbour has almost become a national pastime in some countries. Warning signs and disclaimers are plastered over the streets and across almost all product packaging. Toilets required to have a warning label advising people not to drink the water; boxes of matches advise the user that the contents are flammable. These examples might sound silly but they are in fact real, and demonstrates the present state of our society. Nobody is willing to accept the repercussions of their own actions anymore.

Much of the blame for the financial crisis can be attributed to the overspending of consumers. The typical consumer may earn $4,000 per month, but that same consumer then goes out and buys an overpriced house with payments of $3,000 per month, fancy car at $1,000 per month and non-stop shopping with credit card debts of another $1,000 per month. Hang on: don’t they realise they are spending more money than they earn and still don’t have any left to buy food?

Of course it’s not their fault that they spend more than they earn, so they need to find someone else to blame. Each month they select a new victim to undergo a thorough grilling on the world financial crisis bbq, and the latest to be thrown onto the hotplate are the corporate executives with their excessive pay packets.

EXECUTIVE PAY LEVELS

The issue of corporate executive income levels has been on the radar of consumer groups and the media for quite some time. However, they were never able to generate enough consumer sentiment to create real noise about the topic. Times were good, so the executives must have been doing a good job.

But now that times are not so good, and Australians are starting to feel the pinch with massive job cuts and rising unemployment, the same executives doing the same job as before are being singled out. Before pointing the finger at executives and playing the blame game, the issue of their pay packets should be considered from an unbiased point of view.

So are executives paid too much? What might appear to be a simple question actually has many factors attached to it not normally considered by those outside of the board of directors. Quite simply, no single person’s influence is directly worth the current pay levels, but they can have an enormous influence in other areas that could indirectly impact on success or failure.

CEO’s are considered to be the driving force behind a company, through the implementation of their innovative ideas to move the business forward in a positive direction. When you consider that a CEO of a leading Australian firm could be on a $5 million pay packet, surely it makes more sense to hire five people at $1 million each to take advantage of their combined business acumen and knowledge.

PAY PACKET REASONING

The most common reason given to explain the incredibly large income levels of the executives is market demand. To attract the best CEO’s and other executives, the company must pay top dollar, as they are competing with companies all around the world. This is only partially true though. Whilst it is true that to acquire the services of some CEO’s they will need to pay top dollar, what they don’t mention is that in the majority of cases they are just buying a name, not necessarily abilities.

For a company to hire an executive team on low pay packets, rather than an executive team that possess equal ability but have triple the wage expenditure, it could potentially have disastrous effects on the company. For the general public, this reasoning seems ludicrous, which is why there is such a huge public outcry over this issue at the moment.

The best way to explain the reasoning behind such decisions, is to use a real life example. Michael Jordan was possibly the greatest basketball player of all-time and won six world championships with the Chicago Bulls. After retiring from basketball at the end of the 1997/98 season, he returned to play two more seasons with the Washington Wizards when aged almost 39.

Washington was a struggling team, with no hope of winning a championship, let alone making the playoffs. So why did Jordan return and why did Washington hire him? The decision was purely a marketing move. The sum of money that they spent securing the services of Jordan, was abundantly returned in terms of increased merchandising and ticketing revenue. If they needed funding for a stadium expansion or other franchise expenses, Jordan was their ticket to getting the funding approved.

Jordan was not hired for his on-court presence and basketball abilities, nor was he hired to help the team win more games or make the playoffs. He was hired for name only, and what he could provide to the team in terms of increased revenue and franchise stature.

EXECUTIVE IN NAME ONLY

Just like Mike, the executives are hired mainly based on the positive effects they will have on the company in areas other than the balance sheet. The main measure of the effectiveness of an executive is not how much profit the company is making, but rather how much the share price is increasing.

The board of directors, the shareholders, and in most cases the executives themselves since they generally receive large amounts of shares as incentives, are all interested in ensuring that the share price remains on the up. Dividends paid on company profits are notably minimal, leaving shareholders with the objective of increasing their wealth through positive share price movement.

As share prices are heavily influenced by speculation, the appointment of a big-name CEO usually results in a massive increase in the company’s share price. Similarly, the appointment of a chief executive nobody will almost certainly trigger a share price plunge. From the point of view of a director on the company board, they would never put the bottom line of the company before securing an increase in their personal wealth. The wrong CEO appointment could slash a huge portion from their assets and result in them being removed as a director in the ensuing shareholder backlash.

Apart from a big name being an important factor in the executive selection process, a big salary package is equally important. The share market also considers a low pay packet to equate to a low quality executive. So even a big name on a low package could spell trouble for the company’s stock value.

A high salary package will have a number of other positive implications for the company apart from the share price influence, including developing business relationships and securing funding for expansions and new projects. The banks are known to be heavily influenced in their lending approvals by the presence of a proven, experienced CEO with a generous salary. This point alone could prove to be a make or break experience for many companies, with the lending market shrinking and funding becoming harder to secure.

A LESSON LEARNED

Just because you have lost your job or your financial world is tumbling down, there is no need to jump to sudden conclusions about executives pay levels. After careful consideration of all the facts, the question of whether the corporate executives are paid too much isn’t so clear cut after all.

Maybe the public could put themselves in the shoes of a shareholder of company XYZ. They could be a typical mum and dad investor who could lose a large portion of their retirement savings based on the appointment of a cheaper CEO.

What about being in the shoes of an employee of company XYZ? Imagine a blue-collar worker working for 30 years in the same company since they left school. The appointment of a cheaper CEO could result in the declinal of a crucial application for additional funding necessary to ride out the tough times, and result in the loss of thousands of company jobs including their own.

If the fuss-makers learn anything from these troubled times, it would be to stop worrying about matters that have nothing to do with them. Instead, they should take action to correct their own situations and circumstances, rather than trying to drag other people down into their pool of despair.