Aaron Szepesvary and Buket Ozdil were forcibly evicted from their suburban Melbourne home on Tuesday, the lock drilled, the door smashed open, over an unpaid $20,000 credit card debt.
Plus at least $132,000 in legal costs. The total debt is now almost $300,000.
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Family evicted with nowhere to go
Buket Ozdil was filming as police arrived to forcibly evict her from her suburban Melbourne home over unpaid credit card debts.
When the matter started the pair could have paid off the $20,000 debt easily. They did not, and now have lost everything they own.
Their court-appointed bankruptcy trustees will now sell their renovated three-bedroom house to recover their own fees, along with the debts.
This comfortably middle-class couple have had their life destroyed. Tonight, they and their two children are looking for shelter.
This is a story with a lot of elements. There are, obviously, expensive lawyers. And bad decisions made by non-lawyers.
At its heart, this is a story of how a small error can compound and compound until you lose your home.
Aaron Szepesvary and Buket Ozdil in the home they lost this week. Photo by Justin McManus
Mr Szepesvary, 40, and Ms Ozdil, 42, both took out credit cards about 2004. Mr Szepesvary had been running what he says was a thriving audio-visual company, while Ms Ozdil receives a disability carer allowance from the government.
Mr Szepesvary's company ran into serious trouble about 2008 during the financial crisis – people just stopped buying stereos (the company continues to trade). The couple had recently moved into their new home in Strathmore. Mr Szepesvary was renovating, installing a new kitchen and plastering the kids' room. When she had the time, Ms Ozdil would take Max, 7, and Jack, 6, across the road to the park.
They ran up their credit cards. Too high. About $7000 on Mr Szepesvary's and $11,000 on Ms Ozdil's. And they stopped making the minimum repayments (the couple claim they kept up-to-date with their mortgage repayments all-the-while).
They received numerous of letters asking for payment, initially from the bank. They chose to bury their heads in the sand. At this stage, they could have comfortably repaid the debt.
In April 2013, a company Mr Szepesvary had never heard of, ACM Group, sent him a letter telling him it had purchased his credit card debt and he would need to pay up, or it was going to start bankruptcy proceedings (ACM declined to comment for this article).
Mr Szepesvary cannot read or write. He thinks, and talks, with his hands. He loves high-end audio gear. He does not know anything about the bankruptcy process.
He did not, he says, understand what was happening to him. He couldn't read the letters that kept getting delivered to court. He could not afford a lawyer. When his court date arrived, he did not, and was declared bankrupt in absentia.
"We were just burying our heads in the sand at this point," says Ms Ozdil.
"Our own fault. We don't know what's happening. I'm writing to the court asking how can we contest our bankruptcy, because I don't have a lawyer."
The Consumer Action Law Centre says it sees this pattern repeatedly. Some vulnerable people are totally overwhelmed by court action, by the magnitude of their problems, and bury their heads in the sand. Unfortunately, that only makes things worse.
Three months later Ms Ozdil received her own letter from Baycorp (they also declined to comment for this article). She missed her court date and was declared bankrupt.
Baycorp and ACM are both debt acquisition companies. They probably bought the couple's debts from the credit card companies for cents in the dollar, and then engaged lawyers to enforce the repayment of the debts through the courts.
Gerard Brody, chief executive of the Consumer Action Law Centre, says the process is deeply flawed. Bankruptcy, he argues, should not be used as the legal process to extract debts from individuals who default on credit card debts – primarily because the process is enormously expensive, as it has proven to be in this case.
He argues ACM could have obtained a warrant for seizure and sale of the house instead of a bankruptcy. The couple would still have lost their house, but the enormous legal costs would have been avoided.
"Bankruptcy should be about insolvency, not debt collection."
At this time Mr Szepesvary had $20,000 in cash, according to bank accounts seen by Fairfax Media. The couple also had $300,000 in equity in their house. At this stage they could have comfortably repaid the debt.
When a person is declared bankrupt by the court a bankruptcy trustee is appointed. This court-appointed person is charged by the court with managing a bankrupt's assets to repay as much of their debts as possible.
Because both were bankrupt two separate trustees, Paul Weston and Petr Vrsecky, were appointed (both declined through their lawyers to respond to specific questions for this article).
Aaron had sought legal advice from a community legal centre. The advice, he says, was to accept bankruptcy. Because he was a bankrupt already no lawyer would take on his case without $20,000 in fees upfront.
At this stage, they still probably could have comfortably repaid the debt, plus fees – which, while high, would not have been in the range of the bill eventually incurred.
Instead, Mr Szepesvary and Ms Ozdil decided to fight. They appealed the bankruptcy decision to the Federal Circuit Court. Self-represented, and with legal advice from a fellow bankrupt they met on the internet, their application was dismissed on all grounds. This, it seems, is where the costs grew and grew.
"We're just like a pressure cooker at this stage. How do we get out of this? We have got no legal aid," says Ms Ozdil.
During mediation Mr Szepesvary and Ms Ozdil claim they made several offers to repay the original $20,000 debt. They even offered $40,000. The trustees, they claim, asked for $250,000. They said no.
According to an itemised list of costs given to the couple in September 2015, each trustee has charged more than $40,000 in fees, plus almost $24,000 in future fees.
There is $10,000 in interest charged, plus $26,000 in legal fees.
All up, the total bill is about $291,124.
At this stage, the couple could not repay their debts.
According to an affidavit sworn by Mr Weston, the trustee charged $17,411 in legal costs, plus $39,774 in "estimated time costs". The affidavit includes page on page of itemised costs.
The total cost, including unsecured creditors debts – which the couple contest – now runs to almost $300,000.
In December 2015 the Federal Circuit Court gave the trustees legal ownership of the house, and the right to evict Mr Szepesvary and Ms Ozdil.
The couple held out for almost two months, fighting with the sheriff over the legality of the warrant and preparing an appeal to the courts. Aaron put big bolts on the front gate, and they stopped leaving the house together.
On the February 23, shortly after Fairfax Media started making inquiries about the case, sheriffs officers arrived to serve the eviction warrant. Aaron was not at home at the time.
Video, recorded by Ms Ozdil, shows the lock on the front door being drilled. She thinks they must have cut the lock on the gate.
Tonight, Ms Ozdil and Aaron are homeless. They are staying at Ms Ozdil's mother's place. Their house is gone, their life a still-smoking ruin. All over a couple of credit cards.