Success Story: Settling a $785,000 bank debt for $26,000

What can you do if you owe a large debt to your bank? Can you settle the debt? And if you have limited personal assets can you settle it for a minimal amount? Well, the answer is you can settle the debt. But it will take time and patience to achieve a result, such as the one below.

We were contacted by a husband and wife in 2018. They had had three investment properties in Queensland mining towns. The properties had been sold and there was a shortfall of over $785,000, to the bank which had financed them.

When we met with the clients, we found out that they had no assets which would be sold in bankruptcy. However, the husband had several hundred thousand in superannuation. The husband could keep this superannuation if he went bankrupt. The husband decided that bankruptcy was his best option and he filed for bankruptcy in early 2019.

The wife (let’s call her Mrs Smith) did not want to go bankrupt as she thought it may affect her employment. So Mrs Smith’s only option was to try to settle the mortgage shortfall debt. Mrs Smith had no funds available to make an offer of settlement, but her husband (after he was bankrupt) could obtain funds from his superannuation which could be used for a settlement payment.

By this time, the bank had sold its debt to a mortgage insurer. We told Mrs Smith that it could take over a year to settle the debt as the mortgage insurer was not going to immediately agree to an offer of less than 5 cents in the dollar.

We initially made an offer of $10,000, which we knew would not be accepted. As part of our offer, using our experience as bankruptcy trustees, we set out Mrs Smith’s financial position and told the mortgage insurer that they would get nothing if Mrs Smith went bankrupt.

The mortgage insurer rejected our $10,000 offer and made a counter settlement offer of $195,000. We increased our offer a couple of months later to $12,500 which was rejected and met with another counter offer of $195,000. And that is where things stood for over a year. The mortgage insurer would contact us every month or so to seek an increased offer, which we said Mrs Smith could not make given her financial position.

Now this put the mortgage insurer in a difficult position. Their options at this point were to take legal action to get a Judgment against Mrs Smith and then bankrupt her. Or, accept she had nothing and try to negotiate a reasonable settlement. If the mortgage insurer wanted to bankrupt Mrs Smith it would have cost them probably $15,000 in legal costs, being money they would never get back.

So, in March 2021, we were contacted by the mortgage insurer who made a “final” offer of settlement of $30,000. They had obviously assessed the position and decided getting something was better than bankrupting Mrs Smith and getting nothing. We always like to get the best deal for our clients, so we were able to get the mortgage insurer down to a $26,000 settlement. We prepared a deed of settlement which was signed and Mrs Smith’s husband got $26,000 out of his super fund and paid the mortgage insurer. And Mrs Smith avoided bankruptcy and the possible problems with her future employment.

Our total costs for assisting both Mrs Smith and her husband were less than $13,000, which they paid as the costs were incurred over time.

Contact Us for Assistance

We have previously written about how you can avoid bankruptcy by settling your mortgage shortfall debt here and here or a company’s lease debt here.  And there have been many clients we have helped over the years settle all types of debts they owed.

So, if you are faced with a debt you can’t pay and would like to explore all options that may be available to you, please call us on 07 3221 0055 or contact us for a free, no-obligation consultation.


We’re happy to answer any questions you may have, so please don’t hesitate to call us and schedule a consultation.



Level 12
127 Creek Street
Brisbane Qld 4000


Phone: 07 3221 0055
Fax: 07 3221 8885

Postal Address

GPO Box 691
Brisbane Qld 4001



Level 15, Corporate Centre One
2 Corporate Court
Bundall Qld 4217


Phone: 07 5630 1179
Fax: 07 3221 8885