Bankrupt, Declaring Bankruptcy, Bankruptcy
March 7, 201718

Bankruptcy in Australia – Which Path will you take?

Posted by:Charles Bosse onMarch 7, 2017

There are often going to be alternatives and conclusions in life, and Bankruptcy is no different!

You truly should make certain you know as much as achievable about Bankruptcy in Australia. So when it boils down to Bankruptcy in Australia, there are a great number of possibilities that we can have depending upon who we are, who we approach, and just what has happened. So I wish to tell you about 3 alternatives to Bankruptcy that people are often confused about– Debt Consolidation, Personal Insolvency Agreements, and Debt Agreements – with any luck I can really help you emerge as less confused when it refers to Bankruptcy and your decisions.

CHOICE 1 – Debt consolidation.

This is where you can have an organization wrap up your debts into a singular package.

PROS:

Can assist in saving money on interest.

CONS:

There are lots of fees required (Often outweighing the interest spared).

Won’t assist if your credit rating is poor.

Won’t give you a fresh start – simply tidying up the old financial debt.

When it comes to Bankruptcy in Australia, I would like you to be aware that everybody who gives you suggestions is going to have some kind of viewpoint (even myself) and so be sceptical with anything a person says to you about Bankruptcy. This is certainly very important when you take a look at Debt consolidation because if you talk to somebody who works for one, they are going to of course inform you that it is the best way since they want your money. Every loan that they assist you wrap up into just one nice and tidy package is going to be one more charge– there is a reason that they are such a substantial money-making sector. But, it can nonetheless be a great alternative for you if you think that getting all your financial debts in the one place is going to benefit – because even a small amount of interest saved over years easily builds up.

But chances are that in the event that you are reading this, you have probably already tried out this step, and found out that your credit rating is so poor that you can not get a combined loan, that you are pretty much too far advanced and the small amount of interest saved on won’t make a difference. Most likely you’ve just had enough of the phone calls, demands and feeling of anguish that debt carries– and you are seeking a solution that can provide you a clean slate.

CHOICE 2 – Personal Insolvency Agreements.

A PIA is an adaptable way to arrange your financial obligations without being insolvent, often it is a way of decreasing the quantity incured and organising exactly how and when everything is to be paid off. It doesn’t go as far as bankruptcy, but has a number of quite similar elements and involves appointing a trustee to control your property and develop a proposal to your lenders.

It is not Bankruptcy, but instead an ‘act of Bankruptcy’ which means that if you cannot properly set up a PIA a creditor can easily apply to a court to declare you Bankrupt and force you to adhere to those actions. So it may appear that PIA is a really good option when it comes to Bankruptcy, but it is almost never an easy process to really get all of your creditors to agree– and if you don’t get at least 75% of them to agree, the PIA fails and this will complicate the matter with Bankruptcy.

OPTION 3 -Debt Agreements.

Debt agreements are an additional form of binding understanding between borrower and creditor similar to a Personal Insolvency arrangement.

So when it involves Bankruptcy in Australia, what’s the big distinction then?

Well the initial obstruction is that it depends upon just how much salary you are handling, and specific other thresholds– If you come under the criteria you can lodge a debt agreement or a PIA, but if you are over your only alternative is a PIA. Likewise, you can not have had quite similar financial complications in the previous 10 years for a Debt Agreement, but it is only 6 months for a Personal Insolvency Agreement.

So with Bankruptcy, what is the benefit to a Debt Agreement? The debt agreement is often quicker to put together and are a bit simpler when it involves regulating trustees and handling the government. It can also make things much easier to continue operating your business or be a director of a company.

When it concerns Bankruptcy I’ve come across lenders opting for less than 80 % on infrequent occasions, but that usually only occurs with a public company entering receivership owing significant sums of money (the kind that makes the headlines). If you are owed $10million and you realize the ones who are obligated to pay you the money have a group of dazzling attorneys and some very creative frameworks in place and they offer 5 % of the financial debt, you may take it and be grateful. Sadly, regular punters like you and me in Australia aren’t going to get that lucky!

So in summary, you have 3 choices to Bankruptcy– Debt Consolidation, Personal Insolvency Agreements, and Debt Agreements.

I would certainly recommend starting by considering a debt consolidation – but if you are too far in the red, it possibly won’t make much difference and you will be flooded with expenses.

Then, you need to take a look at whether you are a candidate for a Debt Agreement. If you aren’t, look at a Personal Insolvency Agreement. But despite which one you select, you ought to be realistic with your expectations due to the fact that when it involves Bankruptcy nothing is easy.

If you would like to learn more about what to do, where to turn and what questions to ask about Bankruptcy, then do not hesitate to get in touch with Bankruptcy Experts on 1300 818 575, or visit our website: www.freshstartsolutions.com.au.

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