Financial Dispute Resolution

How is financial dispute resolution different?

Disputes over personal financial matters often arise and require the assistance of professionals to resolve the matter. It is often appropriate to engage solicitors to assist with these matters. However, sometimes the disputes do not necessarily relate to legal issues or the resolution process focuses on who’s right and wrong and ignores the “big picture” factors. The stress, time away from your business or job, and legal costs can outweigh the potential benefits of winning. In other cases, even if you do win the unsuccessful party may not have the ability to pay.

We assist people to resolve disputes with a commercially-minded approach. Often disputes focus closely on the issue that has arisen, but ignore other factors affecting the parties such as time and financial commitments, and the impact of the dispute on the final outcome. As a result, these commitments can cause ongoing stress, a loss of focus on their business leading to decreased performance and financial costs that may outweigh the benefit of winning.

With our experience assisting people in financial difficulty and resolving financial disputes, Cactus Consulting assists people to resolve financial disputes they’re involved in, or mediate between parties to find acceptable solutions they can agree on.

What types of personal disputes can financial dispute resolution help solve?

Types of engagements where we assist to resolve disputes commonly include:

  • Partnership disputes
  • Settling legal claims and litigation
  • Property ownership disputes
  • Settling Bankruptcy Trustees’ claims in relation to property disputes
  • Family business disputes
  • Marital separation or family law proceedings which impact on the structure and performance of a business

Looking at these more closely:

Partnership disputes

Disputes among business partners arise for various reasons. Concerns about the financial status of the business, lack of commitment from one party, changes in personal circumstances, family and marital breakdowns or just general disagreements about the direction of the business.

A departing partner will be concerned about liability for guarantees and payment of tax and superannuation accrued while a partner. They will also want to be repaid their investment and sell their partnership interest, raising disputes over value and the other partners’ ability to pay them out.

Negotiating between parties on a commercial basis puts the emphasis of resolving a departure on commercial grounds, while providing sufficient protection for partners from potential legal action or insolvency.

Settling legal claims and litigation

Litigation can start out with the optimistic expectations, people and businesses can be forcibly dragged into it or it can be just to prove a principle. But cases that start out strong can unexpectedly become problematic, and reasonable expectations of a favourable settlement being agreed can turn to frustration. Disputes are expensive with fees to reach trial often estimated at upwards of $250,000 for each party. Lawyers, barristers, expert reports and court fees all add up. And none of this takes into account the significant emotional and time costs for the people involved, causing stress on their families and impacting their jobs or businesses they run.

For people involved in litigation:

  • losing a court case may mean an inability to pay, resulting in insolvency and  personal bankruptcy
  • even for a litigant expecting to win, they may not be able to afford the costs to proceed to trial, or the other (losing) party may not be able to afford to pay a successful judgement.  Suddenly a winning case can become a lose:lose case.

At the point where continuing litigation may not be the preferred outcome, there’s an opportunity to look at the bigger picture and consider alternative courses of action.

Property ownership disputes

It can be necessary for multiple owners to form syndicates for property investment and development. Changes in people’s circumstances can necessitate departures from the syndicate, presenting challenges for the continuing viability of a project and exposing all parties to potential losses.

In these circumstances, innovative solutions are required to meet the financial needs and limitations of co-investors, financiers and other parties to maintain positive outcomes.

Settling Bankruptcy Trustees’ claims in relation to property disputes

When someone is facing bankruptcy, there can often be a tendency to seek to transfer property or hide assets. Bankruptcy Trustees have extensive powers to obtain information and documentation and investigate a bankrupt’s affairs and pursue claims.

But there are also valid defences to Bankruptcy Trustees’ claims under family law and equitable principles including the doctrine of exoneration. Given the source of these equitable principles being in historical case law, many people who find themselves in these situations are unaware of the potential defences available to them. In addition to some strong legal defences available, there are also commercial outcomes that may be negotiated to either settle claims.

Family business disputes

It’s very easy for small family disagreements to become huge rifts destabilising businesses with high profile cases often hitting the media. The close personal relationships can cause commercial realities to be ignored in the pursuit of personal agendas which can leave the parties with nothing left at the end.

To avoid tearing a family and its wealth apart, pragmatic commercially beneficial and carefully considered outcomes can be negotiated.

Marital separation or family law proceedings which impact on the structure and performance of a business

When a husband and wife with joint business interests separate, things can go one of two ways. We prefer the path that involves delicate handling, careful separation of interests and unwinding of a business from a relationship to preserve its viability. The other option leaves the people involved wishing they took the this path.

We understand the complexities of marital disputes and that each party deserves their wishes to be respected. However, experience has shown that while the emotional impact will fade away, the financial impact of an antagonistic dispute may not. Family businesses can be closed and liquidated and both parties can be left bankrupt – outcomes that impact families and make no one a winner.

Need help to resolve your dispute?

With our experience assisting people in financial difficulty and resolving financial disputes, Cactus Consulting can assist you to resolve financial disputes you may be involved in, or mediate between parties to find acceptable solutions you can agree on.

To understand whether financial dispute resolution may assist your situation, get in touch with us for a free confidential discussion.

Informal Arrangements

No matter how it happens, Australians all across the country can find themselves in financial trouble. Whether it is a missed credit card payment or more significant problems, good professional advice and assistance can help people get back on their feet.

Oftentimes, people will enter official debt agreements with creditors, but find themselves unable to meet the payments. When people need a more flexible restructuring of their debt to avoid bankruptcy, an informal arrangement provides the ideal solution.

How does an informal arrangement work?

Essentially, an informal arrangement involves negotiations with your creditors regarding the amount and timing of payments you make to them. An insolvency specialist can act on your behalf in these negotiations and bring value with their professional understanding and ability to help your creditors understand your circumstances and the available options. It occurs in a few steps:

  • Contacting your creditors for a stay of action until a proposal can be made,
  • You provide your adviser with details of your income, assets, liabilities, personal circumstances and background,
  • An assessment is made of what you can afford to pay and you decide on what you can offer creditors,
  • Creditors are given a letter detailing your settlement proposal, circumstances and expected outcome in bankruptcy, so they can assess whether its in their interests to accept your offer,
  • There may be further discussions and negotiations with creditors until resolutions are reached which all creditors.

If successful, informal arrangements can help you avoid bankruptcy or a debt agreement, meaning you avoid the restrictions of these and there is no formal record on your credit rating. This can allow you to retain any company directorships you hold, as well as protect important assets like the family home.

Who can enter informal arrangements?

An informal arrangement means multiple creditor negotiations, all of whom might have different debts owed. For this reason, the fewer creditors you have, the greater chances an informal arrangement has of succeeding. Generally, six or fewer creditors is ideal, however we have assisted clients with up to 15 creditors. Beyond that, a formal engagement such as a debt agreement or personal insolvency agreement may be more appropriate.

People seeking to enter these debt negotiations must also be able to offer some payments to their creditors, either through realising assets, future income or from friends or family. Some organisations, like the Australian Taxation Office, will not negotiate to reduce the amount of their debt, however they will often accept instalments over time.

Informal arrangements can be used to negotiate debts well in the hundreds of thousands of dollars, across multiple lines of credit, personal guarantees or other claims. If you are liable for personal guarantee debts, or have seen your company go into liquidation and want to avoid bankruptcy, an informal arrangement can offer a way out.

What are the benefits of an informal arrangement?

In addition to avoiding bankruptcy, informal arrangements carry many benefits that are specific to this type of debt negotiation. It is cheaper than a personal insolvency agreement, which means you avoid many costs associated with this process.

It can also be a very quick process. If you have available funds to offer immediate settlement payments to creditors, you may have your situation resolved within a matter of weeks. Creditors won’t always accept your first offer to them, but as insolvency professionals we can help them understand the likely financial outcomes for them under the various available options. Generally speaking, you you will not make any settlement payments until all creditors have agreed to accept settlement offers proposed.

Because we work on your behalf, the initial offering and payment periods are also set based on your means and needs. Rather than meeting the demands of creditors, we mediate and ensure that creditors understand your situation and are treated equally. Creditors will also get better returns than if you were to go bankrupt, even though the full amount of debt may not necessarily be paid.

The process is also not recorded under the National Personal Insolvency Index or your credit record. This means your circumstances are confidential and there is no public record of your arrangements.

Taking the stress out of debt negotiations

Struggling with personal debts, or facing the prospect of going bankrupt is an uncertain and stressful time for anyone. By getting professional assistance to help manage your financial troubles, you can avoid the worst of it. At Cactus Consulting, we understand the various alternatives to bankruptcy, and work on your behalf to relieve the stress of dealing with your creditors.

Working with us to put affordable settlement proposals in place, you can take the time you need to reorganise your finances, pay creditors in a way that suits you, and move on with your life.

Falling into significant debt problems does not have to be the end of your credit integrity. To avoid bankruptcy and regain control of your finances, get in touch with us to discuss whether an informal arrangement is right for you. Even if you simply want a representative to open talks with creditors or to discuss your repayment options, we can help. Getting someone on your side for creditor negotiations can make all the difference in the outcome.

If you would like to read about how informal arrangements have created success stories for our clients, you may be interested in our articles here, here and here.

Debt Agreements

A debt agreement is an alternative to bankruptcy that may be available to assist you with unmanageable debt.

Can I submit a debt agreement proposal?

You may propose a debt agreement to your creditors under Part IX of the Bankruptcy Act if you:

  • Are insolvent (unable to pay your debts as and when they fall due)
  • Have unsecured debts, net assets and income below certain statutory limits
  • Have not been bankrupt, entered into a debt agreement or given an authority under Part X of the Bankruptcy Act in the last 10 years

What are the benefits to me?

If your proposal for a debt agreement is accepted by creditors:

  • Your proposal provides for you to pay a set amount (which is often less than your total debts) in a lump sum, from the sale of your assets or by instalments over time, often from income.
  • All of your provable unsecured debts are included in the debt agreement, even if not all creditors vote on your proposal.
  • Unsecured creditors cannot take action against you to recover their debts.
  • Interest does not accrue on your debts from the date you submit your proposal.
  • You may retain your assets, continue trading your business or managing a corporation.
  • You avoid most of the restrictions of bankruptcy.
  • The process for proposing a debt agreement is reasonably straightforward and cost-effective to maximise the contributions available to your creditors.
  • Subject to complying with the terms of your agreement, you are released from your provable unsecured debts and you are only required to pay the weekly, fortnightly or monthly contributions, or other amounts you agreed to pay under your proposal.

The benefits of a Part IX Debt Agreement, include avoiding bankruptcy and the restrictions to which a bankrupt is subject. If a proposal for a Part IX Debt Agreement is accepted a person is only required to make manageable payments to the administrator of the Part IX Debt Agreement and he or she is not required to make any further payments in respect of unsecured debts, such as credit cards and loans.

What do I need to be aware of if I propose a debt agreement?

There are considerations and consequences if you intend to propose a debt agreement as follows:

  • When proposing a debt agreement you should consider what your creditors may accept, what you can afford to contribute and what would happen if your circumstances change. Generally a debt agreement will provide a better return to your creditors than bankruptcy.
  • If you wish to retain your assets which are subject to security agreements eg. your car or home, you need to maintain payments under these agreements. If you do not the secured creditor may seize and sell the assets.
  • If you enter into a debt agreement and you owe a debt jointly with another person, or someone has guaranteed your debt, they will still be liable and a creditor may pursue them for the debt.
  • Debts for court-imposed fines and penalties, maintenance agreements and HELP are not included in your debt agreement. You will still remain liable for these debts.
  • You are liable for all debts you incur after you enter a debt agreement.
  • You will be subject to certain restrictions if applying for credit or trading a business.
  • The will be a permanent record of your debt agreement on the National Personal Insolvency Index and it will be recorded for 5 years on your credit report.
  • The cost of a debt agreement may be more than the full amount of the debts you owe.
  • The terms of your debt agreement ultimately depend on what your creditors are prepared to accept.
  • Proposing a debt agreement is an act of bankruptcy which, if your proposal is not accepted, creditors may use to bankrupt you.

What’s the debt agreement process?

If you are eligible to submit a debt agreement, we can assist you to formulate your proposal and complete the paper work required to lodge it with the Australian Financial Security Authority (AFSA). AFSA is the government agency responsible for the administration and regulation of the personal insolvency industry in Australia.

Once satisfied with your eligibility and the documents submitted with your debt agreement proposal, AFSA will send your proposal to creditors. Creditors then have 35 days to vote on your proposal by completing and returning a voting form. If the majority in value of creditors voting on your proposal vote in favour of it, your proposal is accepted. Even if you some of your creditors do not vote on your proposal, all of your unsecured creditors are bound by it.

When sufficient funds are contributed to your debt agreement, a dividend will be distributed to your creditors proportionally in respect of their debts. There are up-front costs associated with proposing a debt agreement. However, if your proposal for a debt agreement is accepted the ongoing administration costs are paid from the set amount you proposed.

Where do I go to propose a debt agreement?

If a debt agreement sounds like it may be the right option for you, or you would like further information about options available to deal with your debts, get in touch.

If you would like to read further about whether a debt agreement may be right for you, have a look at these sites:

moneysmart.gov.au

afsa.gov.au

Personal Insolvency Agreements

A personal insolvency agreement (PIA) is an alternative to bankruptcy to deal with your unmanageable debts.

Can I propose a PIA?

You may propose a PIA to your creditors under Part X of the Bankruptcy Act if you:

  • Are insolvent (unable to pay your debts as and when they fall due)
  • Have not proposed a PIA in the last six months.

Unlike proposing a debt agreement there are no debt, asset or income restrictions for proposing a PIA.

What are the benefits to me if my PIA proposal is accepted?

A PIA is a formal agreement to compromise all of your debts. If your proposal for a PIA is accepted by creditors:

  • Your proposal provides for you to pay a set amount (which is often less than your total debts) in a lump sum, from the sale of your assets or by instalments over time, often from income.
  • You may retain your assets or continue trading your business.
  • All of your provable unsecured debts are included in the PIA, even if not all creditors vote on your proposal.
  • Unsecured creditors cannot take action against you to recover their debts.
  • You are only required to pay the lump sum, contributions or other amounts you agreed to make under your proposal.
  • You avoid most of the restrictions of bankruptcy.
  • Subject to complying with the terms of your PIA, you are released from your provable unsecured debts and you are only required to pay the lump-sum amounts, regular instalments or other contributions you agreed to pay under your proposal.

What do I need to be aware of if I propose a PIA?

There are considerations and consequences if you intend to propose a PIA as follows:

  • When proposing a PIA you should consider what your creditors may accept, what you can afford to contribute and what would happen if your circumstances change. Generally a PIA will provide a better return to your creditors than bankruptcy.
  • If you wish to retain your assets which are subject to security agreements eg. your car or home, you need to maintain payments under these agreements. If you do not the secured creditor may seize and sell the assets.
  • If you enter into a debt agreement and you owe a debt jointly with another person, or someone has guaranteed your debt, they will still be liable and a creditor may pursue them for the debt.
  • Debts for court-imposed fines and penalties, maintenance agreements and HELP are not included in your debt agreement. You will still remain liable for these debts.
  • You are liable for all debts you incur after you enter a PIA.
  • You will be subject to certain restrictions if applying for credit or trading a business.
  • The cost of a PIA may be more than the full amount of the debts you owe.
  • The terms of your PIA ultimately depend on what your creditors are prepared to accept.
  • Appointing a controlling trustee in order to propose a PIA is an act of bankruptcy which, if your proposal is not accepted, creditors may use to bankrupt you.
  • It will be permanently record on the National Personal Insolvency Index if you appoint a controlling trustee in order to propose a PIA and it will be recorded for 5 years on your credit report.
  • You are disqualified from managing a corporation during the term of your PIA.
  • The controlling trustee is required to conduct a detailed investigation into your circumstances and financial position and report their findings to creditors. There can therefore be significant costs associated with this course of action.

What’€™s the process?

In order to propose a PIA to your creditors you must appoint a controlling trustee who will review your financial position and circumstances and report their findings to your creditors. The controlling trustee’s report will include a recommendation as to whether or not creditors should accept your PIA proposal.

The controlling trustee will call a meeting of your creditors which will be held within 25 business days of the controlling trustee€™s appointment. Creditors will be asked to vote on the acceptance of your proposal at the meeting. For the proposal to be accepted, you will require the majority in number and at least 75% of the dollar value of creditors voting, to vote in favour of the proposal.

If the PIA proposal is accepted by creditors the PIA will be binding on all unsecured creditors, whether or not they voted.

Once the PIA is in place you will be required to comply with its terms. When sufficient funds are contributed to your PIA, a dividend will be distributed to your creditors proportionally in respect of their debts.

A controlling trustee will seek up-front payment of the costs for their appointment. The costs of the trustee of the PIA will be paid from the set amount of contributions you make to your PIA.

If you believe putting forward a proposal for a PIA is the right option for you, or you’d like to discuss the alternatives available to regain financial freedom, contact us on 1300 4 CACTUS or complete this short form and we will call you.

Bankruptcy Advice

You may think that bankruptcy is the only option left for someone in your circumstances. Bankruptcy is intended to give individual debtors a fresh start, however there may be serious consequences and long-lasting effects for you. You should therefore consider whether an appropriate alternative to bankruptcy may be available to you before you make any decision.

What are the alternatives to avoid bankruptcy?

Depending on your circumstances, as an alternative to bankruptcy you may:

If you require further information regarding these alternatives contact Cactus Consulting for a free, no-obligation consultation.

How do I become bankrupt?

You can voluntarily become bankrupt, or you can be made bankrupt by a creditor (or creditors) owed over $5,000.

You may voluntarily become bankrupt by completing a Debtor’s Petition and a Statement of Affairs (which is a form setting out the person’s assets, creditors and other information) and submitting these documents to the Australian Financial Security Authority.

What are the benefits of bankruptcy?

Bankruptcy provides for the discharge from most, if not all, of your unsecured debts, which allows you to make a fresh start without the burden of debts which you cannot pay.

Will my assets be sold in bankruptcy?

In bankruptcy all of your assets that are “divisible property” will be sold or realised by the bankruptcy trustee. Your divisible property may include your:

  • House or land
  • Shares and other investments
  • Boats and motor vehicles (if valued above a certain amount)
  • Cash in your bank accounts
  • Any tax refunds for periods prior to your bankruptcy
  • Inheritance or gambling winnings you receive before or during your bankruptcy

What assets can I keep?

In bankruptcy you can keep certain assets, which generally includes:

  • Household furniture, belongings and other personal items
  • Superannuation
  • Tools of trade up to a certain value
  • A motor vehicle up to a certain value

You can find the values of certain assets which you can retain here.

What debts are included in my bankruptcy?

Most debts are included in a person’s bankruptcy, including personal loans, credit card debts, debts owed to trade creditors and debts owed to the ATO. There are however, some debts that are not included in bankruptcy. Debts which will not be discharged by your bankruptcy include:

  • HECS or HELP debts
  • Debts due under a child support maintenance agreement
  • Court imposed penalties and fines
  • Unliquidated damages claims from accidents

How long does bankruptcy last?

Bankruptcy will generally last for three years from the date a bankrupt files a Statement of Affairs (which is a form setting out a bankrupt’s assets, creditors and other information).

Can the period of bankruptcy be extended?

The period of a bankrupt’s bankruptcy can be extended so that the period of bankruptcy can be up to eight years. This will most commonly occur in circumstances where a bankrupt has failed to pay income contributions to his or her trustee, or the bankrupt has failed to provide information or documentation requested by the trustee.

What are income contributions?

A bankrupt is required to pay income contributions to his or her trustee if the bankrupt’s net (after tax) income exceeds a certain amount. The amount of after tax income which a bankrupt is able to earn prior to being liable to pay income contributions increases if a bankrupt has children or other people who are financially dependent on the bankrupt for support. The amount of income that a bankrupt is able to earn before being liable for more contributions is available at the following link.

Generally a bankrupt will be able to pay income contributions by weekly, fortnightly or monthly instalments.

Can a bankrupt trade a business?

A bankrupt is able to trade a business, subject to certain exceptions, including:

  • The business must be traded in the bankrupt’s name.
  • The bankrupt must maintain suitable and accurate records for the business.
  • A bankrupt is not entitled to incur credit over a certain statutory amount available at the following link, without notifying the person who is providing credit that they are an undischarged bankrupt.

Ready for assistance filing for bankruptcy? Got further questions? Well call us on 1300 4 222 887 today for a free and confidential discussion.