Why not just walk away?

[Snowi]

Hi,

I'm pretty new here and have been reading a lot on the forum about finance etc. Whereas most people seem to be want to take money over, there might be those not so fortunate. Instead of cash to get out some have a lot of debt to leave behind (and like good citizens hope to pay off as soon as possible). But why not walk away from it: quit your job go insolvent (or whatever the correct term is), get the judgement and make a clean start on the other side (seeing that you credit record here doesn't follow you there) ?

So here is a hypothetical debt scenario:

1. 1 x Prime property, bought at a premium (last year sometime): if you're lucky you will just get you money back & break even: Debt=R1,000,000

2. 2 x Credit Card averaging R25k each: Debt=R50,000

3. 2 x Shopping/Clothing etc. account averaging R5k each: Debt=R10,000

4. 1x relatively new vehicle not at break-even yet (book value=R100k less than owing): Debt=R300,000

5. And just for good measure back taxes owed to SARS: R30,000

The total comes to: R1,380,000 (or R180,000 if the car can be sold for book value and the house be sold at break even which seems like a long shot in these times anyway - still R180,000 is a lot of money that can be applied elsewhere)

So what is the motivation for repaying this debt and not walking away from it? (If you are not planning on returning to SA soon - as I understand you could get a judgement cleared in 5-10 years (if you ever return) - again I speak under correction.)

Also I assume you will always be liable for tax (death & taxes) - again financial experts is this right?

I'm not saying there's no way around it - like renting the house, getting someone to drive the vehicle & pay you, repaying your debt from the other side etc. I know most people (me included) would try and resolve the situation, but I just can't help wondering what the worst case scenario is.

I would love to hear the views of our financial experts on this.

Thanks for allowing me to waste your time!

Cheers

S

[Navigator]

If you do make a clean start in Aus, make sure you don't run up the debt so quickly again.

[Cas]

It's an interesting question but wouldn't a person's conscience get the better of them?

[Mr Van]

I've been wondering the same thing.

In my case, I've only decided to emigrate a few months ago, but before that I was taking money from my bond to renovate, my wife bought a new car (not a fancy car, but still, new), etc etc.

Now that we are planning to go ASAP, the markets are not favoring us, so selling her car would probably not clear the debt, selling our house would take ages and would probably just clear the debt...

I know its not a very ethical thing to do , but hey, I'm not planning to rob a bank here. I'm doing what businesses (Nationwide as latest example) would do: cash out as best you legally (not necessarily ethically) can.

I would also love to hear financial and tax experts' opinions on this...

[Pink Missy]

Well, if I can give my 2c. People on the forum don't want to give you advice on this subject as I also asked about this.

So, if anybody can answer this, please do so, because there are people with problems!

[Duane W]

Like you said its perfectly acceptable for big business to do this so I dont see the problem. The people you owe at least get something out and sending money back to RSA to pay debts over there gets tired real quickly.

Consult a bankrupty lawyer there are plenty of them around.

[Nilo]

For me it's a moral thing, sorry guys!!

I've spent the money I was responsable for buying what I did so I need to honour that commitment.

I would say: do the best you possible can to recoup, repay what ever you can so you can come over here with a clean consious and start over without any baggage.

[Dugong]

...agree with Nilo

Edited May 7, 2008 by Lion King

[sbhennops]

Hi

Well alot of people do this, but it is a moral question I think. I have debt in SA which I pay faithfully every month. In the time I have been here, I have almost paid it off because I can pay double each month. I would not feel right about not paying it, it would haunt me. My clean slate is going to start once I have settled all debt to SA, and that is what I aim for every day I go to work. This is a choice only you can make, and advice or not it is up to you to make the call on this one.

The easy way is going insolvent, but is that really who you are????? There is the saying what goes around comes around, and I prefer not to tease fate as I don't need a backlash later in life. Do what will work for you mate is all advice anyone can honestly give.

Steph

[bluebonnet]

...agree with Nilo

I am not going to write a story about this,, have seen too many people in the US live above their means, build up debt like crazy, and then just file for bankrupcy. That is how they live. I will rather not comment on it, but all I have to say is I agree with Nilo.

[Shadar Auditor]

Hi,

I am an internal auditor and my memory of what I learned in my BCompt Tax subjects is hazy at best but I don't think you'll be able to walk away so easily.

I speak under correction and please don't quote me on this, but I see it playing off as follows:

You declare bankruptcy. This creates legal fees and court cases. Obviously you will have to prove that you are incapable of meeting your debt obligations.

You would need to seek legal advice (which will cost you money) and thus you will have to gather evidence of your insolvency and that you are in fact incapable of meeting your obligations.

Your employer is not going to like that, let me tell you, as they will be interviewed as well.

Should you own your own business, in any insolvency - and especially when you mess with SARS, the corporate veil will be pierced and your company assets will be up for grabs.

Now, back to the point:

You declare yourself insolvent.

Now your bank accounts are frozen (I think) as your creditors fight amongst themselves to strip you bare.

If your house is not sold, it will be reposessed by the bank. You can not be evicted (I think) but you will be charged occupational rent. The bank would order a garnishee through the courts and your employer would be forced to deduct the money off your salary. This is true for all your debt.

Next up the car - easy one - repo.

Next up your assets are repo'd and they have a lovely auction of your prized posessions at the Pretoria Showgrounds.

The banks blacklist you - house, car and ct cards.

Edgars and Truworths loves blacklisting people. The effect - you won't be able to even get a weekender top-up cellphone contract.

No debt is allowed - so buying your airplane tickets will have to be cash. In fact everything you buy has to be cash.

Next up your creditors decide to get an interdict against you fleeing the country. SARS gets on the band wagon and starts going after your wife's assets as well. You can of course also be prosecuted for tax evasion if they realise that you delacred bankruptcy to evade paying your debts (including taxes).

The banks and SARS speak to their counterparts in OZ and good luck getting a bank account or tax number then.

Without those you get back on the plane and try to fix the mess over here...

Of course the point could be moot as you would in all likelihood be put under administration rather than sequestration.

Which means you can go to the toilet when your live-in administrator tells you to.

It really isn't an option.

SARS and most auditors have seen all this before. If it seems to easy it normally is boet and quite frankly the moral implications don't even deserve a mention here as it should be an inherent deterent.

No debt ever just dissappears. You will be left with no assets whatsoever and no way of buying any again. Whatever can be sold will be. This includes your pension money and RA's. It includes investments, shares and the house on the Vaal. If you buy a pack of smokes, they'll be on your case because that money could have gone to settling your debt.

Bottomline: pay your debts.

Again: I am not 100% sure of this but I have seen SARS going after people and it is not pleasant. Hope that solves the issue.

[Katy]

Because it just isn't right! You used the money, you used the car, you used the home - so pay for it! It is as good as stealing in my opinion.

[zorba]

Hi,

Our friends left for the UK a few years back. They owed on their car and their house. They wanted to just get on the plane and leave the car at the airport parking (!!!), but I persuaded them to keep it clean.

They approached the bank and requested a VOLUNTARY repossession. Walked away with nothing - basically "lost" the deposits they had paid in - but could leave with a clear conscience and be able to sleep at night.

I am not a big fan of credit cards, clothing account cards, etc, but realise that they are a "necessary evil" for some. I believe that credit cards are for emergencies only, or where cash is not an option (air tickets, online purchases, etc).

We have a policy in our house that if you can't afford it cash, you can't have it. Exceptions are house and car only. If the credit card is used it is paid back asap, even if it means no Wimpy breakfasts, no movies, etc. Harsh yes, but a great example to the kids.

But I do understand that we are all very different people and have very different circumstances...

The very fact that you are even asking about the debt shows that it worries you to "just leave it" and walk away. So do the right thing. Or it WILL come back and haunt you!

Good luck!

zorba

BTW I am still paying back a cellphone contract in SA even though my son is not schooling there anymore. Wasteful? Yes. But I sleep like a baby at night!

[The 3 R's]

I can see this one heading for the cooler

One thing you can be sure of "death, taxes and the TV LICENCE GUYS"

I don't believe you will ever make a 'clean start' by just walking away - how will you sleep at night ?

I know somebody who left the UK 4 years ago and left approx 4 000 pounds in debt - got away with it for about 2 years, was eventually traced back in SA, was forced to pay back the debt, interest, tracing fees, legal fees, etc - amount went from 4 000 to approx 8 000 - if they want to find you they will !!

It's just wrong, do the right thing, the wheel of life never stops turning

[Corne and Jacqui]

If you have any moral bankbone you'll clean up before you go. Once a deadbeat, always a deadbeat... If you leave your unfinished business here you'll walk the same road again sooner or later in Oz.

[wislon]

I agree with Nilo and Lion King. If one has used the stuff, without essentially paying for it, and has no intention of paying for it, it's effectively stolen. At the very least, the things should be put up for auction to let the creditors get their money back.

Luckily I've kept a very tight rein on all of my finances, and have no debt. Since I decided to emigrate, I've made damn sure I paid everything off. Everything I have, I own. If I can't afford it, I don't buy it. I haven't bought a house for precisely that reason (among others), knowing full well I'd be in hock for the next 20 years, or be in a position like now, battling to sell in a hurry. I have a credit card, but I make sure it's always in the black, or I make a plan to put it back that way within 24 hours.

I actually can't even conceive having R25K worth of debt on my credit card!

If it was that easy to get away with it, everyone would be doing it. And even if you have no intention of coming back, things happen. 30 years from now you could be getting off a plane somewhere in the United Autocratic States of Azania, and they'll come for you.

And remember, if enough smartasses do this, then the legitimate users/consumers get saddled with the bills. That may not mean much to someone who would do something like this, but as I said, things happen...

[Rissiepit]

Have to agree on paying your dues ... many people feel irked as they've had to give up so much in order to emigrate and they couldn't give a hoot about what happens with the debt they leave behind. Times are tough and nothing prevents a creditor from coming after you, even if you're in Australia. Takes a little more time and effort, but they will get you if the debt is of a considerable nature.

The last thing you need, over and above all the other concerns you have once you've landed, is having to worry about an Aus lawyer (acting as a correspondent for a SA lawyer) haunting you for your SA debt.

[zorba]

Hi again,

Just noticed that it was Snowi's 1st post...WELCOME! We're a feisty bunch, aren't we?

zorba

[Leigh MC]

hi Snowi - and welcome.

I agree with Zorba and Wislon - if you can't afford to but it without using a credit card, or getting a loan, don't buy it!

You DID say this was all hypothetical, right? But jeez - that's a whack load of debt!

Back to the point here - it will come back and bite your botty, my friend. AND let's face it, there is always the chance you want to chuck it (Aus) in after a while and come back. Then you land up in jail with your botty in even MORE serious trouble. Just a thought.

L

[mac 4]

Look into a government proposal, it is a step befor declaring bankrupsy and you pay back a portion of your debt. I know conditions apply but it is worth looking into. Good luck to everyone as debit is a pain in the butt and is even worse if holding you back from your future.

[Pink Missy]

Hi Guys

I now read through all the post and came to the conclusion: I made a damn good mess!!!

I spoke to hubby and we decided to do the right thing. So first thing tomorrow morning we

are getting all our things in order! This is going to be a big thing for us, but we are going

to stand strong. I now know that the things I have done in the past wasn't right, but it isn't

to late to do the right thing. So please, pray for us, it is going to be a steep and uphill road

for us, but we will get there!!

[zorba]

Hey, WannebeeOz,

Good on ya, mate!!

There's nothing better than saying "I stuffed up, please help me fix it"... People will respect you and bend over backwards to help.

zorba

[Lynn]

Hi,

I'm pretty new here and have been reading a lot on the forum about finance etc. Whereas most people seem to be want to take money over, there might be those not so fortunate. Instead of cash to get out some have a lot of debt to leave behind (and like good citizens hope to pay off as soon as possible). But why not walk away from it: quit your job go insolvent (or whatever the correct term is), get the judgement and make a clean start on the other side (seeing that you credit record here doesn't follow you there) ?

So here is a hypothetical debt scenario:

1. 1 x Prime property, bought at a premium (last year sometime): if you're lucky you will just get you money back & break even: Debt=R1,000,000

2. 2 x Credit Card averaging R25k each: Debt=R50,000

3. 2 x Shopping/Clothing etc. account averaging R5k each: Debt=R10,000

4. 1x relatively new vehicle not at break-even yet (book value=R100k less than owing): Debt=R300,000

5. And just for good measure back taxes owed to SARS: R30,000

The total comes to: R1,380,000 (or R180,000 if the car can be sold for book value and the house be sold at break even which seems like a long shot in these times anyway - still R180,000 is a lot of money that can be applied elsewhere)

So what is the motivation for repaying this debt and not walking away from it? (If you are not planning on returning to SA soon - as I understand you could get a judgement cleared in 5-10 years (if you ever return) - again I speak under correction.)

Also I assume you will always be liable for tax (death & taxes) - again financial experts is this right?

I'm not saying there's no way around it - like renting the house, getting someone to drive the vehicle & pay you, repaying your debt from the other side etc. I know most people (me included) would try and resolve the situation, but I just can't help wondering what the worst case scenario is.

I would love to hear the views of our financial experts on this.

Thanks for allowing me to waste your time!

Cheers

S

Hi Snowi

I have been in finance for 27 years now, and I have learnt one very valuable lesson which is a social value and which leads in the long run to the dynamic of growth and getting richer and that is:

If you do not close properly on the one side, you will struggle on the other. It is further not ethical and quite frankly immoral to have debt and walk away from it. Someone else holds the short end of the stick. In most cases where debt is concerned, if you negotiate with the person on a settlement, you are able to settle at values lower than the actual debt, just due to the fact that you DID NOT WALK AWAY.

Also what a person does with finances defines the person. In other words, if a person has debt or runs up debt, for someone else to land up with the loss (seeing that they don't) their value system is shot.

Your question is not one of finance but of moral fibre. If it was financial, honouring your debt and looking for way to walk away clean would be the motive. If the motive is to walk away and stuff everybody else, well when the person gets to Aus, they will be the same person and do the same thing to the people there and the country. I am moving to Aus - I am not sure that I want people like that there.

K.rgds

Lynn

[Lynn]

Hi,

I am an internal auditor and my memory of what I learned in my BCompt Tax subjects is hazy at best but I don't think you'll be able to walk away so easily.

I speak under correction and please don't quote me on this, but I see it playing off as follows:

You declare bankruptcy. This creates legal fees and court cases. Obviously you will have to prove that you are incapable of meeting your debt obligations.

You would need to seek legal advice (which will cost you money) and thus you will have to gather evidence of your insolvency and that you are in fact incapable of meeting your obligations.

Your employer is not going to like that, let me tell you, as they will be interviewed as well.

Should you own your own business, in any insolvency - and especially when you mess with SARS, the corporate veil will be pierced and your company assets will be up for grabs.

Now, back to the point:

You declare yourself insolvent.

Now your bank accounts are frozen (I think) as your creditors fight amongst themselves to strip you bare.

If your house is not sold, it will be reposessed by the bank. You can not be evicted (I think) but you will be charged occupational rent. The bank would order a garnishee through the courts and your employer would be forced to deduct the money off your salary. This is true for all your debt.

Next up the car - easy one - repo.

Next up your assets are repo'd and they have a lovely auction of your prized posessions at the Pretoria Showgrounds.

The banks blacklist you - house, car and ct cards.

Edgars and Truworths loves blacklisting people. The effect - you won't be able to even get a weekender top-up cellphone contract.

No debt is allowed - so buying your airplane tickets will have to be cash. In fact everything you buy has to be cash.

Next up your creditors decide to get an interdict against you fleeing the country. SARS gets on the band wagon and starts going after your wife's assets as well. You can of course also be prosecuted for tax evasion if they realise that you delacred bankruptcy to evade paying your debts (including taxes).

The banks and SARS speak to their counterparts in OZ and good luck getting a bank account or tax number then.

Without those you get back on the plane and try to fix the mess over here...

Of course the point could be moot as you would in all likelihood be put under administration rather than sequestration.

Which means you can go to the toilet when your live-in administrator tells you to.

It really isn't an option.

SARS and most auditors have seen all this before. If it seems to easy it normally is boet and quite frankly the moral implications don't even deserve a mention here as it should be an inherent deterent.

No debt ever just dissappears. You will be left with no assets whatsoever and no way of buying any again. Whatever can be sold will be. This includes your pension money and RA's. It includes investments, shares and the house on the Vaal. If you buy a pack of smokes, they'll be on your case because that money could have gone to settling your debt.

Bottomline: pay your debts.

Again: I am not 100% sure of this but I have seen SARS going after people and it is not pleasant. Hope that solves the issue.

Hi, what you saying is pretty correct. In order to formally emigrate or get citizenship in another country you will need a clean slate in SA. A non rehabilitated insolvent is not a clean slate. So you will have to declare insolvency and go through all of that which is expensive in itself, then you will have to wait 5 years to be rehabilitated. In SA you cannot have a bank account until you are rehabilitated, and if you are married in community of property, or your assets were joint, then this would go for you and your spouse (if you are married). Also one of the questions the bank asks is, whether you have ever been insolvent. What is one going to say. Well seeing that you had been dishonest about going insolvent in the first place, well you can tell another lie, surely.

Think carefully on this. Not only are there ramifications from a legal and finance side, there are huge ramifications from the moral dynamics of this. Everyone (without fail) that I have know that has been dishones with money, lied about money or taken someone else out in any form, has paid dearly and twice if not thrice fold. Close properly guys.

K,.rgds

Lynn

[Lynn]

Hi,

Our friends left for the UK a few years back. They owed on their car and their house. They wanted to just get on the plane and leave the car at the airport parking (!!!), but I persuaded them to keep it clean.

They approached the bank and requested a VOLUNTARY repossession. Walked away with nothing - basically "lost" the deposits they had paid in - but could leave with a clear conscience and be able to sleep at night.

I am not a big fan of credit cards, clothing account cards, etc, but realise that they are a "necessary evil" for some. I believe that credit cards are for emergencies only, or where cash is not an option (air tickets, online purchases, etc).

We have a policy in our house that if you can't afford it cash, you can't have it. Exceptions are house and car only. If the credit card is used it is paid back asap, even if it means no Wimpy breakfasts, no movies, etc. Harsh yes, but a great example to the kids.

But I do understand that we are all very different people and have very different circumstances...

The very fact that you are even asking about the debt shows that it worries you to "just leave it" and walk away. So do the right thing. Or it WILL come back and haunt you!

Well done Zorba - you did the right thing - you could have also handed them your sim card for a phone of their own and asked them to take over the repayments. But in essence you did the right thing. You don't only sleep at night, you also have probably been successful and things have gone easier for you because you did the right thing.

K.rgds

Lynn

Good luck!

zorba

BTW I am still paying back a cellphone contract in SA even though my son is not schooling there anymore. Wasteful? Yes. But I sleep like a baby at night!