30 Apr 2019

Compromised mental health and debt matters


4 min

Fueling or extinguishing stress?

Much is written about the Bankruptcy Act 1966 operations about which assets are divisible to a bankruptcy trustee, after-acquired property, and income contributions; and the ability to undo transactions where shown as preferential in nature to certain creditors, or void when a debtor divests assets before bankruptcy in an attempt to evade a bankruptcy trustee’s reach.

What is rarely appreciated and therefore penned is the personal impact bankruptcy can have on the individual mentally, both before and after the fact.

I am certainly not a healthcare professional. My comments come from dealing with literally hundreds if not thousands of people who have gone bankrupt over the years that I have been involved in. Leaving aside those whose financial burdens are akin to “water off a duck’s back” and deliberately incur debts to then seek the relief of bankruptcy (which in reality are few), for the majority of individuals who run a business or incur a personal debt, the pursuit to avoid bankruptcy—and the stress that impacts them personally—can be enormous. It is that dreaded stigma of bankruptcy. The fear of the unknown; often fuelled by incorrect information about the impact of bankruptcy based on flippant advice given around the Sunday afternoon BBQ.Extinguish image_OTP

Regardless of the scenario and the person involved: one constant remains true.

What I see time and time again is a sense of genuine relief when you discuss their financial position and the actual impact that bankruptcy will have on their life and circumstances, now and for the foreseeable future. On many, many occasions those discussions are met with a heartfelt thank you for relieving the fear, the uncertainty, as to what the future may hold. As you would expect, based on this emotional release: these people are not the ones who have deliberately gone out and incurred debts with the intention of ripping off creditors. They are the hard-working people in small business or with overwhelming debts who are just trying to get by.

So, what’s my message here? I suppose it’s that, in bankruptcy there is another side to the story. It’s not just about financial relief for the bankrupt, the rights of creditors, the sale of assets, investigations and recoveries, and a dividend. Principally it’s the human side.

Critically, mental health is oftentimes compromised before the “toxic debts” are amassed. It can manifest in everyday business functions of managing cash flow, chasing debtors, and trying to forecast when and how that next project or client will convert. Even just having that responsibility can weigh heavily on people. And despite having a network of advisors or industry colleagues to work with, business owners can feel isolated in their issues. On a personal level and in consumer debt matters, people can feel ashamed about their lack or somewhat skewed financial literacy.

These mental health issues can either continue to be “fuelled” through disconnection and misunderstandings, or they can be “distinguished” through an ongoing dialogue that is open and respectful.

At Worrells, we’ve long asserted that insolvency law is not just about debts, accounts and possessions—at its base it’s really about people. As professional advisors, whether you practice in accounting, finance, law or any other industry, in these days of increased awareness and concerns surrounding mental health, we must all be conscious of the enormous mental stresses that people facing financial challenges can go through. We’re here to help; contact your local Worrells partner to get the right information to people to end the misconceptions and the toxic emotional stress.

Related articles:
Bankruptcy: it's good for your mental health

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