We are reminded daily of the changing tides of business in our region. Major mining and supplier companies shedding hundreds of jobs from the region’s workforce, Government agencies asked to be more efficient with budgets sliced and small business struggling to keep their heads above cash flow issues. Add to this the increasing numbers of people who are declaring personal bankruptcy.
In Australian culture, failure is not a preferred option. So when the pressures of business collapse join the stigma of personal failure and combine with myths about bankruptcy a perfect storm of doom and gloom results.
The fact is that bankruptcy is an indicator of change. It is inevitable that following boom periods a flattening of markets takes place and the collateral damage for some is the inability to operate in this environment.
But bankruptcy is not the end of the line. It is a business process.
The first mistake is not getting the full picture.
Uncertainty or misinformation can cause people to make decisions that can cause immeasurable damage to a business. Talking to professionals can help you get a clear picture of the situation. These people work to provide services, options and the information you need to take the uncertainly away from the process.
The second mistake is to believe ill-conceived myths.
Top of the list of bankruptcy myths is that most people believe that declaring bankruptcy will mean that you lose everything. Not true – household, personal and other assets such as superannuation are not necessarily affected.
People who have been bankrupt can also run a business again. The key restriction here is that they must run the business in their own name or declare to those they deal with that are bankrupt. Since 1993 the ATO stands equally with all other creditors and will not be paid above others.
The Hunter has, for the most part, managed to buck global and even Australian economic trends until more recently when the levelling-off of our local economy has started to bite. Our region’s resilience and its ability to change gives us some strong foundations for the future. The truth is however that it is people who work to create change that often face the risks and challenges. But on the flip side – there is opportunity that comes with human innovation and strategy.
Lloyd Kerr is a Partner at Jirsch Sutherland's Newcastle Branch, a specialist insolvency practice. In 1993 Lloyd established Jirsch's Newcastle Branch which became the first specialist reconstruction and insolvency practice in the Hunter Valley.