CLIENT PROFILES AND PROJECT OUTCOMES
MARCH, 2011 | A PROJECT FUNDED BY THE VICTORIA LAW FOUNDATION
Financial Counselling Australia.org.au
In 2010, West Heidelberg Community Legal Service received funding from the Victoria Law Foundation to conduct a project titled
Bulk Negotiation for disadvantaged people: Protecting basic income. The project aimed at assisting judgment-proof debtors, who had debts with financial institutions that they were struggling to repay. The term “judgment-proof debtor” describes people who have
no assets and low incomes. They are “judgement proof ” in the sense that there is little point in a creditor pursuing legal action against them, as there is no real likelihood that the debtor can pay – they need all their income just to pay food, rent and utilities. In addition, in Victoria, people in this category have legislative protection from being sued.1
Client cases were collected from legal aid offices, legal centres and financial counselling agencies throughout Australia. Usually these agencies would have contacted financial institutions separately for each client, attempting to negotiate a hardship arrangement, possibly asking for a debt waiver. Because of the one-off nature of this assistance, these approaches are extremely time-consuming. There is also strong anecdotal evidence that outcomes vary considerably and may depend on the ability of the advocate, rather than on any objective assessment.
The project assisted 410 debtors. Instead of negotiations taking place for each client separately, they were bundled together into a “bulk negotiation”. All cases involved clients on a low income, with most receiving some form of Social Security payment. Many clients had multiple debts. Most clients also had other significant indicators of disadvantage, such as mental illness, disability, ill health or were full-time carers.
Six major financial institutions were included in the project, with bulk negotiations conducted with each creditor. Individual creditors were given collated information about all of the clients who had debts with them. This information included the client’s name, debts owed and personal circumstances. Income and expenditure statements were not provided.
Although one negotiation has yet to be completed, the project has successfully negotiated waivers of approximately $3.2 million of debt for the debtors. Generally, creditors accepted the basic premise of the project –that the debtors permanently lacked the capacity to pay their debts. Across the five completed negotiations approximately 85% of matters were resolved by waiver of the debt. Most unresolved matters fell into three categories: