If you are facing financial problems due to whatever reason, there are several debt solutions that can bring about an effective and immediate outcome. The key is knowing which solution would best suit you and your circumstances.
What debt solutions are available to me?
There are several solutions to deal with unmanageable debt. These solutions are classified into two: informal and formal solutions. Informal solutions are not subject to government legislations. They are based on agreements made by you and your creditor/s. Formal solutions, on the other hand, are arrangements regulated by specific laws.
There are several solutions to deal with unmanageable debt. These solutions are classified into two: informal and formal solutions. Informal solutions are not subject to government legislations. They are based on agreements made by you and your creditor/s. Formal solutions, on the other hand, are arrangements regulated by specific laws.
A. Informal Solutions
You may contact your creditors directly to make arrangements for paying your debts. Some creditors may agree to extend your payment period, renegotiate your payments, or accept a smaller amount to clear the debt.
You may contact your creditors directly to make arrangements for paying your debts. Some creditors may agree to extend your payment period, renegotiate your payments, or accept a smaller amount to clear the debt.
Before taking this option it would be advisable to seek advice from a professional, i.e. Registered Trustee or accountant who can help you look at your options and/or negotiate with your creditors on your behalf.
B. Formal Solutions
Under the Bankruptcy Act of 1966, there are four options you can take to deal with unmanageable debts. These are: to declare an intention to present a debtor’s petition, to propose a debt agreement, to execute a Personal Insolvency Agreement (PIA), or to declare voluntary bankruptcy. We will discuss each of these debt solutions one by one.
Under the Bankruptcy Act of 1966, there are four options you can take to deal with unmanageable debts. These are: to declare an intention to present a debtor’s petition, to propose a debt agreement, to execute a Personal Insolvency Agreement (PIA), or to declare voluntary bankruptcy. We will discuss each of these debt solutions one by one.
1. Declaration of Intention to Present a Debtor’s Petition
Once a declaration of intention to present a debtor’s petition is lodged, your unsecured creditors are prevented from garnisheeing your wages and/or the sheriff or bailiff from taking hold of your assets and selling them for a period of seven days. This provides you with more time to speak to your creditors and seek professional assistance regarding the formal actions you can take to deal with unmanageable debts.
Once a declaration of intention to present a debtor’s petition is lodged, your unsecured creditors are prevented from garnisheeing your wages and/or the sheriff or bailiff from taking hold of your assets and selling them for a period of seven days. This provides you with more time to speak to your creditors and seek professional assistance regarding the formal actions you can take to deal with unmanageable debts.
This however is only a temporary solution and if agreement cannot be reached with creditors it will normally lead to the following three options. Only one declaration can be lodged every 12 months.
2. Debt Agreement
A debt agreement may be made between you and your creditors. This debt solution is a binding agreement, where your creditors agree to receive a sum of money that you can afford, to settle your debts. Payments are based on your capacity to pay, after considering your income and household expenses. You are released from your debts when all payments and obligations are completed. For information on proposing and the consequences of a Debt Agreement.
A debt agreement may be made between you and your creditors. This debt solution is a binding agreement, where your creditors agree to receive a sum of money that you can afford, to settle your debts. Payments are based on your capacity to pay, after considering your income and household expenses. You are released from your debts when all payments and obligations are completed. For information on proposing and the consequences of a Debt Agreement.
3. Personal Insolvency Agreement (PIA)
Part X of the Bankruptcy Act of 1966 provides a flexible debt solution that allows you to reach an agreement with creditors to settle unsecured debts. For you to be eligible to propose a PIA, you must be insolvent and must be in Australia or must have an Australian connection at the time of proposal. A PIA most likely involves the payment of less than 100 cents in the dollar. Payments can be made in the form of:
• A lump sum payment from your own money or money from sources not usually available to creditors, such as your family and friends;
• Instalment payment arrangement with creditors; and/or
• Transfer of assets to your creditors or payment of sale proceeds of assets to your creditors.
Part X of the Bankruptcy Act of 1966 provides a flexible debt solution that allows you to reach an agreement with creditors to settle unsecured debts. For you to be eligible to propose a PIA, you must be insolvent and must be in Australia or must have an Australian connection at the time of proposal. A PIA most likely involves the payment of less than 100 cents in the dollar. Payments can be made in the form of:
• A lump sum payment from your own money or money from sources not usually available to creditors, such as your family and friends;
• Instalment payment arrangement with creditors; and/or
• Transfer of assets to your creditors or payment of sale proceeds of assets to your creditors.
4. Voluntary Bankruptcy
If you fail to reach an agreement with your creditors, you may file for voluntary bankruptcy. This period is for a minimum of three years and may be extended by your trustee to up to five or eight years, depending on your ability to fulfil your obligations as a bankrupt.
If you fail to reach an agreement with your creditors, you may file for voluntary bankruptcy. This period is for a minimum of three years and may be extended by your trustee to up to five or eight years, depending on your ability to fulfil your obligations as a bankrupt.
During bankruptcy, the trustee takes your divisible assets and sells them. The proceeds of the sales are paid to your creditors in compensation for your debts. If you are employed and earning an after-tax income that is above a set limit, you are required to pay half of the excess amount to your creditors. Subject to your compliance of requests made of you during your bankruptcy, you are automatically discharged from bankruptcy three years after the day you have filed your Statement of Affairs.
How do I choose the right solution?
It is important that you seek professional assistance when deciding on an option that suits your circumstance. Be careful to manage your expectations realistically. For example, if you are proposing to make payments in instalments, then you must be sure that you can afford it. If not, you may consider other options.
It is important that you seek professional assistance when deciding on an option that suits your circumstance. Be careful to manage your expectations realistically. For example, if you are proposing to make payments in instalments, then you must be sure that you can afford it. If not, you may consider other options.
We hope this article has answered your questions about debt solutions and options. For further information, please contact us directly via e-mail or through our Insolvency InfoLine Hotline 1800 802 702 for a FREE consultation.
The information in this article was correct at the date of posting and should be relied upon as a guide only. We urge you to always seek professional advice before taking any further action.
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