Back to basics: ‘Consumer’ Bankruptcy Case Study


Sarah is a nurse who used to earn $70,000 including tax and superannuation. Unfortunately, she lost her job and has a large credit card debt that has been building to unsustainable levels as she’s been paying the minimum repayment for over a year. Her debts total some $80,000 and her only asset is a car that is worth $6,000.

She has an overseas holiday booked in six months’ time for a destination wedding and she’s a bridesmaid. Naturally, she wants to go and she can’t face telling her friend that due to her own financial mess, she can’t go.


Sarah is fearful about her finances and her financial future. She’s overwhelmed with how much information there is online. Her research is also finding that some of the information is contradictory, which is making the situation feel more hopeless and she wants to devote her time to finding a new job. She’s secretly hoping that her next job could mean that her debt will become more manageable and that really, she just needs to live ‘light’ for a while.

However much she tries to focus on a solution in finding the ideal job in nursing, her level of debt is stressing her and she can’t stop wondering if there’s a way to fix her debts and actually whether it’s matter of her choosing bankruptcy or if she will be made bankrupt for non-payment of her debts. And if she becomes bankrupt, Sarah is wondering what would happen to her in the following circumstances:

  • Can she keep her car?
  • Can she still go overseas?
  • What if she chooses bankruptcy and then lands a higher paying job: will she lose the extra income?
  • What happens with her nursing registration…will future employers know about her financial problem or will she have to tell them if she chooses bankruptcy?
  • How will her credit rating be impacted and for how long?

Worrells’ approach

A Worrells Partner, we’ll call him Paul, meets with Sarah at a Worrells office near where she lives on an obligation-free and confidential basis. This meeting happens at no cost to Sarah.

Paul goes through her asset versus her debt position and the formal insolvency options available.

Paul explains that at Worrells, we offer all insolvency services, including Part IX (part 9)—debt agreement, Part X (part 10)—personal insolvency agreement, and bankruptcy.

This means Worrells can provide appropriate advice based upon individual circumstances and explain how each solution works, and therefore are in the best position to make an informed and considered recommendation to people.

Given Sarah’s circumstances, either bankruptcy or a debt agreement (part 9) were the available solutions to resolve financial problems.


Paul went through the major differences between a bankruptcy or a debt agreement part 9, as follows.


Paul then answered Sarah’s concerns under the insolvency options available.


Paul’s view is that there was little difference between the two solutions from the perspective on the effect on credit.

Both recorded on the NPII (bankruptcy is permanently recorded, and debt agreements for a limited time) and would affect future credit application to some extent depending upon Sarah’s individual circumstances at the time.

Paul tells Sarah she should take her time to decide what she felt was the right thing to do for her life and said they could talk again once she had processed this information in a couple days to discuss how she felt and any other questions she had.


  • keep her car
  • go overseas, if she gained her bankruptcy trustee’s consent (which was likely)
  • keep any income, if it remains under $55,000 after tax in any new job she secured.

Although Sarah appreciated the effect on her future credit, she felt that her current credit record was already somewhat problematic, and by choosing bankruptcy she could end the current level of debt she had incurred and start with a new attitude and approach to her finances. In short, bankruptcy would give her the financial relief she needed to move forward.