In the past year the banks have extended a financial lifeline to 55,362 people unable to afford their mortgage repayments, personal loans or mounting credit-card debt.

Since February at least 31,000 hardship applications have been made.

Hardship principles were adopted by the banks in April 2009 to assist homeowners to get through the Global Financial Crisis.

Hardship provisions include 12 months repayment freeze for sacked workers, payment deferrals and loan re-structuring and extensions.

The hardship provisions are designed to help families keep their homes and avoid bankruptcy.

On the other side of the equation, the tax department is now prepared to assist sole traders and companies with tax debts by allowing the debtor to enter into repayment arrangements with the ATO – without general interest charges and penalties that are normally associated with tax debts.

The repayment arrangements are usually over 12 – 24 months but at Liquidation Direct we have heard of even longer periods being negotiated by the ATO – again without Penalties and Interest.

This shows the government is doing what it can to protect revenue, stop the incidence of liquidation and bankruptcy and keep employment up in very difficult times.

Acting Justice William Windeyer said there was ”a direct causal connection” between the involvement of the The North Sydney Solicitor mentioned above, and breaches of the Corporations Act by the company directors he advised.

The judge will hear further submissions about penalties.

The case involved the transfer of assets from companies nearing insolvency to purchasers in exchange for so-called ”V shares”.

Creditors such as employees and suppliers who had a continuing association with the new company were paid what they were owed however other creditors of no on-going value or need such as insurers and tax authorities were not paid. In fact, the scheme that The North Sydney Solicitor promoted was specifically designed to help insolvent companies avoid obligations to the Tax Department.

The judge says ”What has really happened here is that a scheme has been devised to bring about asset stripping but to attempt to make this seem legitimate by providing for “V” class shares,”.

Of Mr North Sydney Solicitor, he said in each instance it was ”clear that he aided, abetted, counselled and by carrying out the necessary work procured the carrying out of the transaction”.

The judge noted that Mr North Sydney Solicitor’s barrister, Bernie Coles, QC, had argued that a lawyer could not be liable under the Corporations Act by ”just giving advice”.

”That, of course, may be the position in a normal case, but that depends upon what advice was given,” the judge said.

”If advice is given … by a solicitor to carry out an improper activity and the solicitor does all the work involved in carrying it out apart from signing documents, it seems to me that there can be no question as to liability.”

The senior partner of CRS Warner Kugel/Liquidation Direct – Mr Steven Kugel was the responsible person for identifying the Phoenix Transactions promoted by Mr North Sydney Solicitor and bringing them to the attention of the ASIC and the ATO.

Steven Kugel worked on at least 5 The North Sydney Solicitor style liquidations and they all had the same feature in common – the transfer of assets from a company that was hopelessly insolvent to another newly formed company. The consideration for the sale was the issuance of Dividend V class shares to the value of the assets transferred to the new company.

The issue with the Dividend V Class shares as consideration for the transfer to assets was that the shares gave an apparent right to dividends out of the new company to the value of the assets transferred into it – but the declaration of any dividend was entirely at the discretion of the new company directors. Further there was no trigger for the payment of dividend at any time.

In circumstances such as this, the directors could manipulate future profits and never declare a dividend to the Dividend V class shares and therefore, the transfer of assets would be achieved without the old company receiving any funds whatsoever for its assets.

So the old company was left with nothing but debt and its assets had been transferred away and beyond the reach of creditors – a classic phoenix transaction.

The Housing Industry Association performance of construction index (PCI) was at 40.5 index points in August, below the key 50 level that separates expansion from contraction.

The PCI rose 2 index points from the previous month, indicating the pace of contraction slowed slightly in August.

The August survey reflects tight credit conditions and difficulties securing new project work, particularly within the engineering construction sector.

Job shedding among construction firms continued in August, but at a slower pace, the report said.

Dunn & Bradstreet found that 33 per cent of postcodes had fallen into the “high-risk” category of financial distress, with Victorian suburbs facing the highest risk of defaulting on debts.

This is up 30 per cent on the same time last year.

The company’s Geographic Risk Indicator (“GRI”) maps data on individuals who have had a history of not paying their bills.

A high-risk suburb has more individuals who have previously defaulted on their bills, and the assumption is that they are more likely to default on their bills in the future.

Those suburbs categorised as a high risk are 340 per cent more likely than average to include households that have experienced previous negative credit defaults.

The GRI reveals that 33 per cent of suburbs are rated a high risk, with Victoria having the most significant percentage of such postcodes, 46 per cent.

This is followed by Western Australia with 35 per cent and NSW with 30 per cent.

The research, released exclusively to The Australian Newspaper, lists the Melbourne outer suburb of Frankston North as the postcode with the highest risk of default, followed by two of Sydney’s most exclusive eastern suburbs, Bellevue Hill, the home of Ros Packer, and Woollahra, the address of former premier Neville Wran.

Of the 50 most financially stressed suburbs, 29 are in the first-home owners belt, which includes the outer Melbourne suburbs of Chirnside Park, Cranbourne and Carrum Downs and Sydney’s western suburbs Mount Druitt and Auburn. These areas have seen a sharp rise in credit obligations since the increase in the first-home owners grant.

Last week’s GDP figures showed the economy had gained pace, driven by increased spending on equipment and by households, which helped to make up for falls in private investment.

There are concerns about the next phase in the economic downturn as interest rates start to rise towards the end of the year and the Rudd government’s stimulus package starts to wear off.

Dunn & Bradstreet chief executive Christine Christian said the rising risk of loan defaults underlined the potential for the global financial crisis to become a personal credit crisis in many Australian homes.

“If you scratch the surface, there are still problems in the economy,” Ms Christian said. “As a country, we have amassed a lot of debt. Each person has $160 of credit for every $100 earned. If unemployment rises or interest rates increase, we will see a significant fallout.”

D&B defaults analysis reveals the path to financial difficulty often begins with defaults on small, non-bank credit obligations before escalating to more significant defaults.

news.com.au article

Mr Lanciana, a concrete panel builder, based in Maidstone, Victoria, was fined $4000 for managing Victoria Pre Cast Pty Ltd while disqualified.

ASIC’s investigation found that Mr Lanciana acted as a company director between January and May 2007 despite being disqualified as a result of a previous theft conviction.

Victoria Pre Cast Pty Ltd went into liquidation in October 2007 owing over $2.8 million to unsecured creditors.

The matter was prosecuted by the Commonwealth Director of Public Prosecutions.

Individuals who are convicted of a fraud or dishonesty offence which is punishable by imprisonment for at least three months are automatically disqualified from managing corporations for five years. If the convicted individual is sentenced to a period of imprisonment, the five year disqualification period commences from the day they are released from prison.

The Government has changed the law to the extent that a creditor cannot press for bankruptcy unless their debt exceeds $10,000. The previous limit was $2,000.

Attorney General Robert McLelland says the changes to the Bankruptcy Act will encourage people to address their debt situation early and enter into informal payment arrangements with their creditors or formal arrangements such as Debt Agreements under Part IX of the Bankruptcy Act.

Mr McLelland rightfully points out that the return to creditors in a Debt Agreement under part IX of the Bankruptcy Act resulted in an average return to creditors of $0.76 cents in the dollar -v- $0.016 cents in the dollar from a bankruptcy.

Mr McLelland also says that the debtor will often have a lifelong millstone around their necks if they are forced into  bankruptcy by a creditor as this will affect their credit rating and ability to borow for a home, a car or small business.

There is no doubt debtors should be encouraged to repay their debts to the best of their ability and we believe the Minister should be applauded for his about face on his proposal to reduce bankruptcy from 3 years down to 1 year – we believe this would have resulted in a far greater number of bankruptcies than has been the case.

We do however believe that the efforts of debtors in attempting to repay their debts through a Part IX Debt Agreement should be recognised by the government in changes to the way people are listed  on the National Personal Insolvency Index (NPII) - a government data base that lists persons in Bankruptcy, Debt Agreements or Personal Insolvency agreements.

At present, creditors and credit rating agencies make very little distinction of persons listed on the NPII in repect to bankruptcy or a Debt Agreement or Personal Insolvency Agreement and we feel this is unfair to those debtors that do genuinely attempt to repay their debts and maintain a decent credit rating.

The other point to make is that while it is all very well to raise the limits upon which a creditor may push for bankruptcy, in practive, very few creditors indeed would spend the requisite $6-8,000 to force a persons bankruptcy to recover a $2,000 debt. It is simply not commercial to bankrupt a person for under $10,000 and the government’s change is only a recognition of that fact.

Notwithstanding this, it appears to have attracted a much wanted headline for the government.

From first hand experience of advising people facing the trauma of debt collectors, we can say that people seem far more upset at the prospect of the Sheriff seizing personal property than the concept of bankruptcy.

And little does the average person know that if they did declare bankruptcy, they could be better off and would not lose most of the personal items and income that they believe they will lose.

Should you be experiencing problems and wish to explore all your options with all the information you will ever require, call Liquidation Direct on 1300 100 285 – anytime – 24 hours – 7 days – Free.

Under the proposed changes a creditor can only petition to have someone declared bankrupt if they have a debt of $10,000, instead of the current level of $2000.

The timeframe between the application for that petition and when assets can be taken also will be increased from seven days to 28 days.

Attorney-General Robert McClelland said there was an 11 per cent increase in bankruptcy last financial year caused largely by the global economic downturn.

Just over 34,000 people were declared bankrupt last year, mostly because of consumer debts, Mr McClelland said.

Under the changes, about 20 per cent of those would have escaped bankruptcy, he said.

Mr McClelland said while some people may abuse their credit cards, there were those who hit financial trouble through no fault of their own because of a lost job, illness or for some other reason. He said the current situation allowed creditors to use the bankruptcy process too easily.

“We’re also concerned that too many creditors are using bankruptcy as a tool in debt collection as opposed to a last resort,” Mr McClelland said.

“So increasing the threshold from $2000 to $10,000 will be a disincentive for that to occur.”

The changes would be in the best interest of the creditor and debtor, he said.

Mr McClelland said when both parties entered into a debt agreement the creditor usually recovered 76 cents in the dollar, compared to 1.6 cents when someone was declared bankrupt.

He said the changes would also benefit the debtor because bankruptcy could cause a lifetime of trouble.

“It has very significant consequences all-round.

“From the debtors’ point of view, they have a lifelong millstone around their neck which will impede them obtaining a loan for a house certainly, a car probably and probably also for a small business.

“So if we can get people acknowledging the difficulties early, obtaining advice early and sitting down and negotiating early, that’s what we’re about,” Mr McClelland said.

article excerpts news.com.au

A press release approved by the board of James Hardie in February 2001 was found to contain deceptive and misleading comments about the company’s capacity to meet its compensation liabilities for asbestos sufferers.

Corporate watchdog ASIC had asked the court to disqualify Mr Macdonald for up to 16 years and fine him between $1.47 million to $1.81 million.

Justice Gzell disqualified Peter Shafron, the former general consul of James Hardie, for seven years and fined him $75,000.

Former chief financial officer Phillip Morley was fined $35,000 and disqualified for five years.

The non-executive board members, including Meredith Hellicar and Telstra director Peter Willcox, were each fined $30,000 and banned from managing a company for five years.

Reserve Bank boss Glenn Stevens has told a parliamentary hearing in Sydney that while he does not expect rates will shoot up by that margin overnight, buyers must still plan ahead.

“It used to be the practice, I thought, that certainly banks test whether the borrower could cope with a two percentage-point increase,” Mr Stevens

“I’m not endorsing 2 (per cent, but) … lenders should be applying that test.”

“Interest rates right at the moment are unusually low at 3.0 per cent… but they won’t stay that low indefinitely,” he said, without shedding light on when the next move might be or by how much rates could rise.