Issue 37 - February 2007

• Reverse mortgages - beware of the risk!
• Bankruptcy - a last resort (Part 1)
• Family Relationship Centres
• Online dispute resolution
• Cronulla Sharks Junior Australian Football Club
   

Always do your homework Reverse mortgages - beware of the risk!

We are frequently asked to give our clients advice in relation to "reverse mortgages", the mortgage product which is advertised as allowing home owners to "unlock" the equity in their home.

You might have seen the television commercials where the grandmother hands over 1 or 2 bricks to members of her family. A recent survey has found that the rise in these types of mortgages is likely to boom over the next couple of years as "asset-rich, cash-poor" homeowners use the equity in their home to access one or more lump sum amounts during their retirement years. Some of these products even provide for an initial lump sum, followed by smaller payments each 12 months during the term of the loan.

Unlike a "regular" mortgage product, no payments are required to be made on these types of mortgages until the last surviving borrower permanently vacates the property or passes away. While this may sound like a great product, the reality is that the interest, fees and charges continue to accrue and compound over the life of the loan and the total amount is then repaid once the property is sold. In addition, these loans are also usually offered with higher interest rates and charges than "regular" products.

The advice we always give our clients is to make sure that, in consultation with their family and their financial adviser, they have completed all the calculations. It is surprising how quickly an initial loan of $50,000 can become a debt of more than $200,000 with these types of products. It is also possible that, over time, and particularly with the slow housing markets we are currently faced with, the amount of the debt can grow to be greater than the value of the house.

It is also appropriate for potential borrowers to properly consider how they propose to spend the funds and whether alternative arrangements can be put into place. In addition, potential borrowers should also investigate whether there will be any consequences on their pension or any other entitlement they may receive.

If you require advice about a reverse mortgage or any other mortgage issue, please telephone Rebecca Flynn or email rebecca@wmdlaw.com.au.

ITSA releases latest bankruptcy statistics Bankruptcy - a last resort (Part 1)

Figures released by the Insolvency and Trustee Service of Australia (ITSA) on 12 January 2007 indicate that bankruptcies in New South Wales reached 2,244 in the December quarter of 2006. This represents an increase of over 30% compared with the same time in 2005.

The figures released are for personal insolvency only and not corporate insolvency, which is an area controlled by the Australian Securities and Investments Commission (ASIC).

Of the December quarter results, 89.7% of were not related the failure of a related business as opposed to the remaining 10.3%, which were business-related, not that it matters. Last year, Terry Gallagher, chief executive of ITSA said that most bankruptcies were related to unemployment or the excessive use of credit.

In the previous year, almost 30,000 people sought the shelter of bankruptcy or had bankruptcy imposed on them. The vast majority of bankruptcies - approximately 90% - are initiated by the debtor. Although ITSA provides information packs with prescribed information about debtor’s petitions, the consequences of bankruptcy are disastrous for those who wish to obtain credit later on and many, although swearing that they have read and understood this information, actually do not.

Bankruptcy is there for the benefit of the debtor and not for the creditors. The consequences of bankruptcy however, are not trivial. For those in the unenviable position of not being able to meet their obligations or knowing that this may happen in the foreseeable future ought to immediately contact their lawyer for advice and direction on the steps to take in consultation with their accountant.

This article is to be continued in our March 2007 newsletter however, for further information regarding bankruptcy or insolvency issues, please contact telephone Craig Pryor or email craig@wmdlaw.com.au.

A new approach to relationship breakdowns Family Relationship Centres

Following recent changes to the family law system in Australia, newly established Family Relationships Centres will place unprecedented emphasis on the encouragement of mediation rather than litigation when it comes to dealing with family law issues.

With the introduction of the proposed changes, separating couples are encouraged to use the new Family Relationships Centres, but it is not compulsory at this stage. In future years however, the law will mandate that parents attend dispute resolution before taking a parenting matter to court (with exceptions, including matters relating to child abuse or violence).

The Family Relationships Centres, run by Interrelate Family Centres, will provide assistance to families either going through separation or seeking to make their relationships better. As highlighted by Jonathan Toussaint, Area Manager of the recently opened Caringbah branch, families in the Sutherland Shire will now have access to "information, support and referral to a range of services that can prevent family breakdown or ease the difficulties associated with separation or divorce".

Over the next 2 years, 65 new Family Relationship Centres will be established in cities and towns across Australia. In addition to providing relationship information and advice, the centres will also run public information sessions on a range of family relationship issues, including on parenting after separation. This means that families will now have a government-funded avenue for obtaining individual, group and joint sessions with professional, qualified staff to help separating families make workable arrangements for their children.

The centres will provide individual advice free of charge as well as providing up to 3 hours of joint resolution sessions (eg mediation) for free. The centre is also supported by the Family Relationships Advice Line (1800 050 321) and Family Relationships Online.

The Sutherland Shire Family Relationships Centre is located at Shop 1C, 383-385 Port Hacking Road, Caringbah, or can be contacted directly on (02) 9525 6488.

If you would like any more information about the role of the Family Relationship Centres, or in relation to any family law matter, please telephone Greg Dickson or Kevin Dwyer or email greg@wmdlaw.com.au or kevin@wmdlaw.com.au.

Cyber-mediation, what next? Online dispute resolution

The Law Council of Australia has reported that it will commence a 6 month trial of an online mediation facility on its website, beginning this month.

The system is to operate in a chatroom style with the service providing separate 'rooms' to which password-protected access is available to various combinations of parties, the mediator and lawyers. This would enable lawyers to confer clients either before or during the mediation without the need to meet face-to-face.

The service will allow greater flexibility, access and participation by all parties regardless of geographical constraints or time management issues.

The parties can appoint their own chosen mediator or one can be appointed from an accredited panel of mediators with online dispute resolution training. The cost per case is to be a fee of $70 per party, including all its representatives.

The Law Council will seek feedback from users to determine whether to continue after the trial period.

For more information on litigation or dispute resolution, including online mediation, telephone Craig Pryor or email craig@wmdlaw.com.au.

Sponsorship Announcement Cronulla Sharks Junior Australian Football Club

We are very happy to announce our association with and sponsorship of the Cronulla Sharks Junior Australian Football Club.

The Club caters for players from 5 to 16 years of age. They have had considerable success over the last 3 years and the under 11 and under 12 teams both won their grand finals in 2006. Perhaps, more importantly, the Club has seen a substantial growth in the last year in its membership which means that more young people get the opportunity to play Australian Football.

The Club's home ground is at Gwawley Oval at the Corner of Taren Point Road and Box Road in Caringbah. More information about the Club can be found on their website - www.cronulla.sharks.jafc.org.au.

We wish the Club continued success for the 2007 season.

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