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Case Study – Unexpected Illness or Injury

Mohammed works in a call centre and is on a casual contract. 

Following a routine medical check-up he is diagnosed with a malignant melanoma.  He immediately commenced treatment however he was unable to work for 4 months.

Mohammed does not have any income protection or sick leave entitlements due to being a casual employee. The immediate loss of income causes big problems.  As he wants to concentrate on his health he just ignores the creditors collection calls about his overdue accounts.

Following successful treatment, he returns to his job and contacts his creditors regarding his debts;  he did not apply for Hardship Relief  when he was off work and now he has returned to work he is deemed ineligible.

Mohammed is notified that defaults have been listed on his credit file which has resulted in him being declined for a Debt Consolidation Loan.

Due to 4 months of no communication or payments, some creditors have written off and sold the accounts to aggressive debt factoring agents.  These agents are applying more pressure, demanding Unrealistic repayments and  threatening legal action. He is scared as he has received a notice of court action and is not sure what he can do.  Mohammed desperately wants to avoid Bankruptcy, however,  is unable to make the payments being demanded. 

Debt

Balance

Minimum Payment

Personal Loan

$8,000

$88 per fortnight

Payday Loan

$1,500

$150 per fortnight

Credit Card #1

$3,300

$49 per fortnight

Store Card #1

$2,300

$40 per fortnight

TOTALS

$15,100

$327 per fortnight

An overview of Mohammed’s Debts

Mohammed contacted Life After Debt ® who advised that a Part IX Debt Agreement would likely be the best option.

Mohammed was made aware by Life After Debt ® that;

  • A Debt Agreement is a compromise on unmanageable unsecured debts which enables the individual to avoid Bankruptcy. All unsecured debts must be included and they would need to be assessed against the eligibility criteria.
  • If the offer is accepted he would each have one manageable repayment based upon what he can afford, rather than what each Creditor is demanding.
  • He would have protection from any further collections harassment, legal or recovery action.
  • Furthermore, the interest on the debts is frozen.
  • Not all Creditors have to agree to the offer for it to be accepted.  The outcome is decided by the majority of creditors in dollar value.
  • A listing would be placed on his credit file which would remain there for 5 years and his details  would be recorded on a Government database  called the NPII.
  • As the Administrator, Life After Debt would receive an administration fee which would be deducted from the contributions to Creditors.
  • As the Debt Agreement is processed by a Government department called AFSA, they would receive a realisations charge which would be deducted from the contributions to Creditors.

Summary Result (Once Accepted)

· Reduced unsecured debt repayments from $327/fn to $150/fn (a reduction of $177/fn)

· Will be debt-free in 4 years

· The credit file listing will be removed in 5 years

· Avoids legal action by Creditors and court date is suspended

· Interest on debt is frozen

· Fees are largely absorbed by contributions to Creditors

Mohammed is so relieved that his legal protections means he does not have to attend a court hearing.  The offer is manageable and he can relax knowing he does not need to deal with the debt factoring agents anymore.

Please note that this is an example only and not an actual case.