CFA member Nicola Howell (PhD researcher, Melbourne Law School and Senior Lecturer at QUT) is researching the impact of financial difficulty assistance, bankruptcy and debt agreements on consumer debtors. A better understanding of how people experience the different options, and whether they improve the lives of debtors in the short and long term, can help assess how well the relevant laws are working, and whether changes are needed.
Nicola is inviting people who have used one of these options to complete an online survey. If you can help by letting relevant clients or former clients know about the opportunity to participate, please get in touch with Nicola by email firstname.lastname@example.org or on (07) 3138 2006.
About the study
As many CFA members will know, credit and bankruptcy laws provide several options for people who are over-indebted. Many people are directly affected by one or more of these options: in 2017/18 there were 16,811 new bankruptcies and 14,834 new debt agreements, and in 2016-17 there were over 300,000 requests made to the banks for financial difficulty assistance, which may include a hardship variation.
We hope that using one of these options will help a person stabilise their financial situation and reduce the risk of future debt problems. However, we don’t know much about what happens once an option has been chosen. For example, does a debtor’s financial situation and financial wellbeing improve during bankruptcy? If so, is that improvement maintained in the long-term, or do debt problems recur? What other impacts does bankruptcy have, including on health, relationships, employment and housing? And to what extent are future outcomes affected by whether or not someone has had access to financial counselling or financial capability training, or has had to make payments from their income?
Without this sort of information, questions about whether the laws are working well, or whether changes are needed, are difficult to answer. A recent example is the discussion about the appropriate length of bankruptcy, with a proposal for automatic discharge after 12 months. Having better information about the impacts of bankruptcy on debtors could usefully inform these and other policy debates.
To learn more about the impact of financial difficulty assistance, bankruptcy and debt agreements, Nicola is inviting people who have used one of these options to share their experience through anonymous online surveys. The greater the response to the surveys, the more she can be confident that the range of experiences are represented, and the more useful the data will be for policy-makers and others.
Nicola is asking financial counsellors, consumer advocates, and others to promote her research to clients or former clients who may be interested in participating .
Comparing the Australian and Dutch systems
As part of her study, Nicola is also collecting information about outcomes in the Dutch debt relief system. Looking at how another country deals with similar issues can give insights as to how the local responses can be improved, as well as help develop a better understanding of the role of law when people have consumer debt problems.
There is a large comparative consumer bankruptcy literature, but most of it compares the systems in continental European countries with systems in the UK, Ireland and North America. Few studies compare Australia’s approach with approaches in other countries.
In the Netherlands, there are two main debt relief options for people with consumer debts: a voluntary settlement option that is negotiated with creditors and a statutory debt restructuring option (the Wsnp procedure). As in Australia, any debt remaining at the end of the procedure is discharged. However, there are some differences between the two systems, including:
- In both Dutch administrations, debtors have to pay any income earned above a fixed amount to their creditors, and the amount of income that can be kept is close to low.
- It is not possible to access the statutory procedure without having first attempted a voluntary settlement, and this must usually be done through a debt counselling agency.
- It is a legal responsibility of all municipalities to provide their citizens with access to a minimum amount of debt counselling.
- Debt counselling agencies can also ask that people undertake a budget course or similar program before they start to negotiate with creditors on their behalf.
Comparing the two jurisdictions will help provide some insights into the features that best help people recover from consumer debt problems.
Please contact Nicola if you have any questions, or if you can help to promote the surveys to potential participants.
Nicola Howell PhD researcher, Melbourne Law School Senior Lecturer, Faculty of Law, Queensland University of Technology
email@example.com or (07) 3138 2006