If you are still financially sound, debt consolidation may be a good option for you. It is a way of combining your debts from multiple lenders into a single loan, and most often with a lower interest rate. This can be much easier for people to manage then multiple debts.
Controlling your spending is easy to do if you have a budget and stick to it. Budgeting and responsible spending and saving habits are the best way to ensure you stay debt-free over the long term. Regardless of whichever option you take, these skills are vital to ensure a long term healthy relationship with money.
An informal arrangement between you and your creditors may give you more time to pay your debts if you are facing short term financial difficulty. This can commonly be known as a hardship application. Many people try and openly communicate with their creditors about their situation and may be able to negotiate an offer.
However, it is not always easy to have all your creditors agreeing to your offer. It is also not legally binding on all creditors. There are many more options if you have not been successful with this method.
Do you have a home loan and equity in your property? If so, you can refinance your home loan to repay other high-interest debts.
If the above options were not helpful and you have sought a financial advice, accounting advice or something similar to no avail, then a formal option may be the right option for you. When we use the term ‘formal options’ we are referring to the following three solutions;
1. A Debt Agreement
2. A Personal Insolvency Agreement
3. Personal Bankruptcy
We will break these down into a brief description of each below, however, it can still be overwhelming or confusing to know exactly which option would be best for your circumstances. Please know that we offer a FREE over the phone consultation to help you understand the options and choose the best path to go down. Please contact us through any of our website links to speak to one of our experts.
Bankruptcy is a legal process where you’re declared unable to pay your debts. It can release you from most debts, provide relief and allow you to make a fresh start.
You can enter into voluntary bankruptcy. We refer to this as a debtor’s petition. It’s also possible that someone you owe money to (a creditor) can make you bankrupt through a court process. We refer to this as a creditor’s petition.
Bankruptcy normally lasts for 3 years and 1 day.
When you are bankrupt:
you must provide details of your debts, income and assets to your trustee.
your trustee notifies your creditors that you’re bankrupt – this prevents most creditors from contacting you about your debt.
your trustee can sell certain assets to help pay your debts.
you may need to make compulsory payments if your income exceeds a set amount.
If you believe that this may be a possible solution for you, please contact us for a one-on-one consultation where our experts will guide you.
A debt agreement is one of two agreement options available. A debt agreement, also known as a Part IX (9), is a legally binding agreement between you and your creditors.
A debt agreement can be a flexible way to come to an arrangement to settle debts without becoming bankrupt.
You negotiate to pay a percentage of your combined debt that you can afford over a period of time.
You make repayments to your debt agreement administrator, rather than individual payments to your creditors.
After you complete the payments and the agreement ends, your creditors can’t recover the rest of the money you owe.
Personal insolvency agreement
A personal insolvency agreement (PIA) is one of two agreement options available. A PIA, also known as a Part X (10), is a legally binding agreement between you and your creditors.
PIA’s can be a flexible way to come to an arrangement to settle debts without becoming bankrupt.
A personal insolvency agreement involves:
The appointment of a trustee to take control of your property and make an offer to your creditors.
The offer may be to pay part or all of your debts by instalments or a lump sum.
Other important information you need to know includes:
There are no debt, asset or income limits to be eligible for a PIA.
The length of your PIA will depend on what you negotiate with your trustee and creditors.
You may retain your assets (such as house or car) if the terms of the agreement allow.
Fees apply to process, propose and manage the agreement. You must speak to a trustee about the fees they may charge.
You may not be released from all debts