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What I’m learning from bankruptcy

For the past three years I’ve had an issue bearing down on me, which I did my best to put aside as I got on with the rest of my life. However, the result of it all was that I became bankrupt a few months ago. It’s all quite complicated, so I won’t go into the finer details, but the short (TL;DR) version is:

I became a company director five years ago, and ended up being responsible for paying over $200,000 to the Australian government for taxes and superannuation that should have been paid to them by my company’s managing accountant but, according to the government, was never paid to them. Corporate law demanded that I pay it, which I couldn’t, so I became bankrupt in June this year.

Note: this is a very long post, but it’s what I needed to write. I’ll do a ‘contents’, so you can sort of see what I’m writing about:

  • Sometimes life just throws you lemons
  • The impact on my life
  • What am I learning from this?
  • What about the Law of Attraction?
  • Where am I going?

And now, on with the story.

Sometimes life just throws you lemons

There was nothing I could have done differently to avoid this – other than choose to not be a director of the company in the first place.

The ‘company management’ business (which included the company I was director of) ended up being sold to a very large and professional accountancy company that made the purchase after doing their own due diligence and not seeing any issues. However, it wasn’t until after they’d purchased the company/ies and then did a more detailed financial investigation that they found some of the companies they had purchased had more liabilities than income (insolvent trading), and so the companies were put into liquidation.

It was the investigation by the liquidators that discovered there was a bigger problem which I was responsible for as company director under Australian corporate laws. As a result of the liquidation investigation I was declared negligent for not being able to see discrepancies in the accountant’s financial reports, and so I was made responsible for paying hundreds of thousands of dollars to the government that it says it never received.

Being declared negligent was depressing. Considering that the professional accountancy company that bought the businesses couldn’t see anything wrong in their own due diligence, I eventually felt better when I realised that if they weren’t able to find anything wrong, how was I? But that didn’t change the situation for me, of course.

After a couple of years of investigation by myself into my own option while struggling with the prosecuting lawyers, and eventually coming to the conclusion that bankruptcy was the only real option I had, I ended up getting very depressed about the entire thing. Bankruptcy has such a stigma attached to it, that I felt like I was a failure, and felt that it meant I wasn’t able to cope with the intricate challenges of life.

I spent a great deal of time trying to work this out, in the background of all my other activities in life and my article-writing. I was trying to reconcile these events with all the positive thinking advice that I give others. Not to mention that I advocate the ‘Law of Attraction’ in many of my articles and personal philosophy, so I was trying to work out what I was attracting into my life that required me to become  bankrupt. (More on that below….)

Overall, I did everything I could to try and stay positive. Learning more about bankruptcy and what it meant for me was a major part of me getting over my depression about it. I was depressed because I felt helpless and out of control, but once I knew what the consequences of my choices would be, I felt in control again and was able to make those choices with some level of confidence. Now, I’m almost an expert on bankruptcy!

It was an odd experience for me to be going bankrupt – not because I couldn’t afford to live my life, but because I was subject to actions outside of my control that resulted in corporate laws demanding I pay hundreds of thousands of dollars to the government that I wasn’t able to pay.

I had only two options:

  1. go bankrupt and pay only a certain amount over a set threshold, and only for three years, while having a bad credit rating for seven years, but allowing me to continue saving money along the way, or
  2. pay the total amount they demanded, which would likely require all my disposable income to do so, and likely be over a period of ten years. I’d have no ability to save money for the entire ten year period.

Bankruptcy was the best choice, and was one I chose for myself, rather than having it forced upon me. When I received a summons to appear in court to have them demand I pay it or be made bankrupt, I declared voluntary bankruptcy at that point, so that I could avoid the stress of having to go to court to deal with a result that was going to be inevitable. By doing it myself it also allowed me to choose my own bankruptcy trustee, instead of having a public trustee provided to me if it was the court making me bankrupt. The difference is similar to being able to choose your own lawyer compared to being given a public lawyer…

The impact on my life

Luckily for me, my life has been one where I hadn’t attained any significant assets they could take, so the impact on my life has been less than what it could have been. There’s only two real effects it has on me:

  1. The bankruptcy trustee receives 50% of any after-tax income I earn over a set threshold (example only: if the threshold is $1000 a week and I earn $1500 a week, then they would receive $250 a week from me) for three years, and
  2. I have a really bad credit rating for seven years (although after the first three years I become a ‘discharged bankrupt’ and have a better chance of getting credit than an ‘undischarged bankrupt’).

recently wrote about how I was excited to be considering an upgrade to my car. This was written from a point of view I had at that time (last week) that my current vehicle lease would be continued by the finance provider, who had assured me after I went bankrupt that it wouldn’t affect their continued provision of the lease for me.

However, since writing that post, I arranged for the lease financier to provide me more information about leasing options, and I learned that even though they were happy to maintain the current lease despite my bankruptcy, that they wouldn’t be entering into a new lease for any new vehicle. Nor would they be interested in re-leasing the residual in two years time (residual = the amount I’d need to pay to keep the car once the vehicle lease is over), which would mean I’d need to make a cash payment of about $18,000 at that time to keep the vehicle.

So I contacted my bankruptcy trustee for more information about my options should I pay cash for the FJ Cruiser during the terms of the bankruptcy, which would make the vehicle an asset instead of a leased vehicle. I know that once I went bankrupt I’m allowed to save whatever I can, as long as I maintain my payment obligations according to my income, but I’m not allowed to gain any new assets or they’d be taken away from me.

They assured me that if I saved enough money to pay out the residual, that the car would remain mine and would not be considered an asset as they’ve already ‘disclaimed any interest’ in it. However, if I was to sell the car instead and try to buy a new car, then that would be subject to investigation as a ‘new’ asset and would probably be claimed by them if it was over a certain value (about $7000 – they would likely sell it and give me back the $7000).

So I’ve started a savings plan to ensure I have enough cash set aside to make that residual payment in two years time, so that I can keep the FJ. Having that will be better than having nothing!

This, along with saving for the wedding next month, and for a (planned) baby next year, and for the rest of life’s expenses over time….

What am I learning from this?

One of the things that I’ve wanted in my life is a more minimalist approach to my lifestyle. I’ve been lucky over the recent years that I’ve avoided purchasing major assets that could be taken by bankruptcy, and I want to continue that. Even though I don’t plan on going bankrupt again (well… who ever plans it in the first place?), this experience is encouraging me to continue seeking and maintaining a minimalist approach to life, so I’m appreciating it for that.

It also means we’ll (my fiancée and I) need to be careful with how we manage our finances and our life as we move forward, because we won’t be able to take advantage of credit for a while – but that’s certainly a good thing! Ultimately, I’m seeing this as a positive experience to assist me in developing a better foundation for my future.

One of the reasons I wanted to write about this was to talk about something that I know MANY people in similar situations keep to themselves. The stigma of being bankrupt means that they feel embarrassed and ashamed, and do what they can to keep it a secret from everyone they possibly can. Some people even decide they can’t live with the shame and commit suicide.

I guess as part of my journey through life, a significant reason for me sharing my life’s experiences is to let those who share the same experiences know that they’re not alone, that there’s someone else out there who’s experiencing them too. And by sharing them, and bringing some of these ‘kindred spirits’ a feeling of relief that they’re not alone, maybe I can help them. If a person who’s feeling alone and afraid and considering suicide can read my words and realise that it might just be ok, then that’s a life saved.

Sharing stories of your life can be worth more than you might ever possibly realise. I hold that in my mind as I share my own life with you.

The very biggest thing that I’ve learned from all this is how much my fiancée, Fanfan, loves me. Through my darkest times, where I’ve had nothing to give her, she’s been there for me, giving me her strength and her love and her support. She would tell me that if we had nothing and were forced to live on the street, then she’d be there with me to keep me warm as we sat in our cardboard box, sheltering from the rain.

She’d hold me as I lay empty and depressed, and tell me that it’s only one of those dark periods we have in our life. A ‘down time’. With her strength and her support I was able to find my own strength to find and do what I needed to do.

Have I said I’m getting married next month? Oh yeh, that’s right – I have. This woman is amazing. She’s everything I need in my life, and I love her more than anything. ‘Behind every great man is a great woman’ – she’s my great woman.

Anyway, on with the story…

What about the Law of Attraction?

Yes, I’ve thought a great deal about this and what I’m attracting into my life.

There’s a few steps to achieving what you want when you use the Law of Attraction:

  1. Work out what you want. Define it, hold it in you mind. Don’t define the ‘how’, just define the ‘what’.
  2. Get out of the universe’s way. Let it work out the best path for you to take so it can give you what you want.
  3. Take action on opportunities that come your way that feel like they just might lead you in the right direction.
  4. Before you know it, you’ll discover that you’ve arrived where you want to be.

Becoming a company director five years ago felt like the right thing to do. Interestingly, becoming bankrupt and the consequences of it also feel like the right path I’m supposed to be on. At least, it does now that I’ve reconciled my ignorance about it, and appreciated what my choices and consequences were.

As a result of going bankrupt, I had no money and I was ironically without work at the same time. My fiancée and I were trying to do what we can to make ends meet, and since there weren’t any jobs in Canberra, she suggested I look in Sydney. We were getting a bit desperate, needing money to not just make ends meet, but to also pay for our wedding costs.

So I looked in Sydney and happily got the first job I applied and interviewed for. I started almost a month ago, but had to come here to live and work during the week, and go back home to Canberra for the weekends. It’s also been another struggle for both of us as we each try to maintain a life and lifestyle in two different cities (she’s working in Canberra and I’m working in Sydney), juggling the costs of my ‘living away from home’ accommodation and expenses while trying to save for the wedding, and having to also deal with the emotions of being separated from each other.

But we’re getting there.

And being in Sydney feels like the right place to be. The work is enjoyable, I’m managing the accommodation and commuting ok, and I’ve made a ‘dinner buddy’ at a local restaurant to keep me entertained at nights. He’s an ‘intellectual’, so we have many stimulating and rewarding conversations.

Where am I going?

I don’t know where the universe is taking me right now, but the path I’m on feels like the path I’m supposed to be on. There’s pain and growth involved along the way, but I can feel that I’m moving in the direction I’m supposed to be moving in. I’ll do what I can to avoid getting in the universe’s way, and just let things be what they’re going to be.

That’s my story about my bankruptcy. Another adventure in the journey of my life. There’s more to come.

If you have any questions about anything I’ve written above, ask below. I’ll be happy to answer anything you want to ask.

Thanks for reading! Please add your own thoughts below.

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