Stigma surrounding the word “bankruptcy” continues, evident from negative terms with which it is often connected – treason (in the Australian Constitution)[1], sexual offending (aged care), and fraud, being some. And bankruptcy has meanings beyond its legal meaning, as in moral bankruptcy and bankrupt of ideas, and negative connotations beyond.
But I have not seen it connected before with gambling and alcoholism.
Some jurisdictions have dispensed with the word in an attempt to dispose of its stigma. Its history is grim, or at least that of non-payment of debts. Putting aside the too unpleasant physical harms, I have reported that insolvents in Scotland, on being declared bankrupt, were forced to wear a yellow and brown bonnet and tights while sitting in the public square between 10 and 12 noon. Punishment for bankruptcy – wearing a yellow and brown bonnet in the public square – Murrays Legal
Steele’s Spectator summed it up in 1712 – as “that most dreadful of all human conditions,” and given the then continued use of debtors’ prisons, that may have been true.
The spelling of the word went through some changes over the centuries – bankruptism, bankrupture and bankruptship were some.[2]
Australia has the distinction of being one of the last places in the world to do away with debtors’ prisons.[3] Three year ‘imprisonment’ for bankruptcy debt – Murrays Legal
Consistent with that, while a one-year period of bankruptcy was apparently decided upon in 2016, it has not eventuated, and is not now being discussed. One objection to any reform was that this would lead to the proliferation of organised crime, and it would probably fade the curtains.
Another rationale was that the more regularly people can get out of insolvency, the more chance they have to reoffend, which could otherwise be put as the more people we make and keep bankrupt, the less they will offend.
ASIC sought retention of the 3 year period to prevent directors resuming their business roles. It saw no inconsistency between a capable person whose business is impacted by floods going bankrupt and being automatically out of commercial action for 3 years, and an inept director of a liquidated company who has no immediate limitation in starting again. Although ASIC might eventually catch up: $93m? and 300 creditors? over 20 years? Director disqualified – Murrays Legal
The “Short a Few Quid” article in 2015 refers to newspaper coverage of bankruptcy cases revealing a
“consistent narrative of hubris, extravagance, eccentricity and flagrant dishonesty”
referring to the bankruptcies of millionaire businessmen Alan Bond and Christopher Skase.[4]
As AFSA reports, about half of bankrupts have debts of less than $50,000, compared to the Australian average of over $260,000. And renters make up around 90% of new personal insolvencies, compared with an economy where 31% of Australians rent. In other words, personal insolvencies are largely skewed towards renters with unsecured debts and a low savings or asset base – obvious hives of hubris, extravagance, eccentricity and flagrant dishonesty.
Wills
All this tirade is prompted by my recent visit to a law library. While I have seen the word bankrupt connected with other negative terms, I have not seen what appears in Hutley’s Australian Wills Precedents [10th ed only, at 25.18] being advice as to how to leave property under a will to someone who is a gambler or an alcoholic or a bankrupt, or perhaps all three.
Apparently, a discretionary testamentary trust is available to safely nominate a person in one or other or all of those states as a beneficiary under a will.
The authors’ rationale might be that gamblers and alcoholics do go together, but with bankruptcy only perhaps because gambling and alcohol can lead to it.
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[1] Both bankruptcy and being attainted of treason are disqualifications from being a member of parliament.
[2] New Directions in Bankrupture? (1996) 5 New Directions in Bankruptcy 12, Murray.
[3] Contrary to the Spirit of the Age: Imprisonment for debt in Colonial Victoria 1857-90, Boyd, Ramsay and Ali, [2019] 42(3) MULR 737.
[4] Ali, Paul; O’Brien, Lucinda; Ramsay, Ian — “Short a Few Quid’: Bankruptcy Stigma in Contemporary Australia” (2015) 38(4) UNSW Law Journal 1575.
