A RECORD number of Wyndham residents are entering into special agreements with banks and creditors in a last-ditch attempt to avoid bankruptcy.
Figures from the federal government’s insolvency department show 46 residents entered “debt agreements” in Hoppers Crossing, Tarneit and Truganina as they struggled to repay their debts. There were 53 residents in Point Cook, Werribee and Werribee South. The two Wyndham postcodes had the highest number of debt agreements across Victoria in 2011-12.
Wyndham Legal Service manager Denis Nelthorpe warned debt agreements could be dangerous and said too many people were signing up without knowing much about them.
“Debt agreements really only suit people who have got significant assets or equity in a home, but many people who enter into them are renting, have no assets and are actually wasting money,” he said.
“Even if they do own a home, by the time they enter into a debt agreement, they would be in real difficulty with their mortgage, and if that’s the case, a debt agreement is unlikely to assist.”
A debt agreement is a binding contract that can give creditors the right to take a portion of someone’s pay cheque to repay debts, or proceeds from the sale of property or assets. It is an alternative to bankruptcy for people struggling to repay debt but stays on their credit file for five years.
While debt agreements rose in Wyndham, the number of bankruptcies fell 25 per cent from the previous financial year, from 124 to 93. Wyndham’s number of bankruptcies was still the third-highest in Melbourne.
Mr Nelthorpe said bankruptcy was often a better option for low-income earners. “It’s an act of bankruptcy and it has the same effect . . . people don’t realise it shows up as just that on their records. But worse, if you enter a debt agreement, you end up with the disadvantage of bankruptcy but you have to pay more money to creditors.” He urged Wyndham residents in debt to seek free advice from a community legal centre or financial counsellor.
Anglicare Victoria’s Werribee-based financial counsellor Shungu Patsika said Wyndham residents were particularly at risk of falling into crippling debt. Mr Patsika, who last year helped 62 Wyndham residents enter bankruptcy, said many had been on low incomes and had access to inappropriate levels of credit.
