# Should debtors who have previously used debt settlement, be allowed a second go?



## Brendan Burgess (20 Nov 2009)

6.[FONT=&quot]              [/FONT]What restrictions should be placed on the use of the proposed debt settlement scheme by individuals who have already availed of debt discharge under the scheme? [Paragraph 5.145]


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## Bronte (23 Nov 2009)

*Re: Should debtors who have previously used debt settlement, be allowed as second go?*

Don't think people should have a second go.  That wouldn't be fair to anyone.  Don't mind anyone being given one chance.  Probably because I blame the bankers, developers and government a lot more for the mess people are in than ordinary people themselves.


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## Colndas (23 Nov 2009)

*Re: Should debtors who have previously used debt settlement, be allowed as second go?*

You can't simply state that one strike and you are out. Given that circumstances may be beyond somebodys control they should be allowed find a path out of their troubles.

That said, any hint of recklessness on their part should preclude them from availing of it a second time. Fool me once and all that.


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## jack2009 (23 Nov 2009)

*Re: Should debtors who have previously used debt settlement, be allowed as second go?*

People should be given a second chance.  If somebody makes a debt settlement arrangement once then they have a black mark against them and it is up to the people issuing credit to deal with this people with a degree of caution and to not readily give out excessive loans or credit limits!


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## Colndas (23 Nov 2009)

*Re: Should debtors who have previously used debt settlement, be allowed as second go?*

I agree, I just think that some level of responsibility must lie with the person getting into debt. It can't be carte blanche for people to borrow, live a certain lifestyle and then walk away from it time and time again.

As much as the onus is on the lender to ensure that they are lending money responsibly once the person has been through the process they should have the wherewithal not recklessly borrow.


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## Brendan Burgess (23 Nov 2009)

*Re: Should debtors who have previously used debt settlement, be allowed as second go?*

Just to be clear, the issue here is not whether they should be allowed borrow again.

it is asking if someone has availed of the Debt Settlement Scheme and 10 years later, they are back in trouble, should they be allowed avail of the Debt Settlement Scheme a second time? 

I would imagine that lenders would be very, very slow to lend to anyone who had come through a debt settlement scheme even if they had earned their "fresh start".  They would probably be limited to the Sub-prime lenders for a long time. 

I presume that the Debt Settlement Scheme would stay on their ICB record for ever? 

Brendan


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## csirl (23 Nov 2009)

*Re: Should debtors who have previously used debt settlement, be allowed as second go?*



> They would probably be limited to the Sub-prime lenders for a long time.


 
All bets should be off for sub-prime lending. Any company offering them is aware of the risks and anyone taking the money is well aware that there is a high chance that they will not be able to pay it back. Should be excluded from any debt settlement scheme.


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## Colndas (23 Nov 2009)

*Re: Should debtors who have previously used debt settlement, be allowed as second go?*

If somebody avails of any Debt Settlement Scheme they should find it difficult to get themselves into that position a second time. 

If that does occur then rather than allowing them immediate access to the facility there should be a number of caveats in place. 

If the family home is to be excluded from the first Debt Settlement Scheme then perhaps it could be included on the second bite of the cherry.


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## Brendan Burgess (23 Nov 2009)

*Re: Should debtors who have previously used debt settlement, be allowed as second go?*



csirl said:


> All bets should be off for sub-prime lending. Any company offering them is aware of the risks and anyone taking the money is well aware that there is a high chance that they will not be able to pay it back. Should be excluded from any debt settlement scheme.



Hi CSIRL

Are you suggesting that sub-prime lenders should not be obliged to participate in debt settlement schemes? You can't have a debt settlement scheme unless all creditors are forced to participate. 

Brendan


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## Bronte (24 Nov 2009)

*Re: Should debtors who have previously used debt settlement, be allowed as second go?*



Brendan said:


> I would imagine that lenders would be very, very slow to lend to anyone who had come through a debt settlement scheme even if they had earned their "fresh start". They would probably be limited to the Sub-prime lenders for a long time.
> 
> I presume that the Debt Settlement Scheme would stay on their ICB record for ever?


 
If it remains on the ICB record then it's not a fresh start? The worst thing possible would be for people to be forced to sub-prime lenders, that's just creating more of a mess.

I suppose the percentage of people who would do this a 2nd time would be miniscule so maybe it doesn't matter. If you've done it say at 30 years of age and then do it again at 40 you'd in general be a no hoper or very very unfortunate or totally irresponsible. Even if this were true, now that we are going to have tightened up responsible lending I suppose it means overextending is unlikely to happen to as many people ever again.


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## Brendan Burgess (24 Nov 2009)

That is a really good question. What does a "fresh start" mean? 

I presume that it means 


The person's debts are wiped out.
The creditors can no longer pursue them.
They can accumulate new assets from start without having to pay off their old creditors
They are not restricted from acting as directors
They are not prevented from holding public office
I would hope that it does not mean that their record in the ICB will be completely wiped out and that there will be no history of the their Debt Settlement. 

I think that this is a key piece of information which a potential lender needs to know.


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## csirl (25 Nov 2009)

*Re: Should debtors who have previously used debt settlement, be allowed as second go?*



Brendan said:


> Hi CSIRL
> 
> Are you suggesting that sub-prime lenders should not be obliged to participate in debt settlement schemes? You can't have a debt settlement scheme unless all creditors are forced to participate.
> 
> Brendan


 
Can you have preferential creditors who get first bite of the cherry and the sub-primes only allowed to fight over the left overs?


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## Colndas (25 Nov 2009)

This preferential creditor system is there at the moment in that a lender  will have a mortgage on your property, you may have secured assets such as car finance and then personal debt such as credit card and credit union that is unsecured.

Sub prime lenders are not nasty evil people who want your soul they are a business and a lot of people who took loans with them knew it was last chance for them to get back on an even keel. A lot of times the loans were to clear short term debt which people used as an excuse to rack up more short term debt. 

The world we live in is not the *solely* the Sub primers fault and anyway they have the deeds of the family home as security and no Debt Resolution system will get a mortgage lender to relinquish their hold on the title deeds. It would be like turkeys voting for Christmas. Sorry drifting off topic.


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## kaplan (25 Nov 2009)

whilst a lenghty report it is worth reading the commissions document if at least to understand the concept of "earned discharge" - the presumption of the guilty reckless borrower who should be punished through bankruptcy which favours the creditor without regard for creditor reckless lending is set to one aside as an wholly outdated concept - thus earned discharge means just that - a person is free of debts subject to the work out agreement - an allied an important concept relates to financial literacy and behaviour in the use of debt. The majority of people make rational use of debt and are not normally over indebted- the problem we are not facing is one where people are over-indebted through no fault of their own having made reasonable assumptions of their ability to repay their loans - assumptions based on valid data available that a property bubble and economic collapse was not about to occur. Suggesting that they should be stigmatised beyond the conclusion of their earned dicharge period (usually 3-5years) is not a fair or just position -


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## bond-007 (2 Dec 2009)

I would hope that after say 5 years it would be removed from the ICB.


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