Insolvency Options Will Depend on Your Level of Debt
Everyone wants a brighter future, but sometimes when as individuals or as a business we look at our finances, we are faced with some sobering reality checks as we see all the outstanding debt. The inability to pay debts has seen an increase in the last few years and a rise in the use of voluntary arrangements.
One of the main advantages of the different insolvency options available to us is that the relentless pressure of dealing with unsympathetic creditors is lifted from your shoulders. The idea however is to recognise when you are in financial difficulty and take steps early so that things don’t get beyond control.
There are a number of options available to you if you want to avoid bankruptcy, but this will depend on your level of debt. An Insolvency Practitioner can help you with the appropriate action to take.
You Have to Work Towards a Compromise with Creditors
Bankruptcy isn’t the only option; there are several options available to you, and with a Personal Insolvency Agreement for instance, you avoid bankruptcy, legal costs as well as court proceedings. As Australians, you need to bear in mind that whichever insolvency options you choose, they will impact your credit rating, and it is for this reason that it is important to consider each one before you agree to anything.
With a Debt Agreement your Creditors Accept what you can Afford
There are professional debt agreement agencies that are standing by to help Australians drowning in debt. Debt Agreements are insolvency options which are an alternative to bankruptcy but there are also eligibility requirements that need to be met and it will end when all obligations and payments have been completed.
Debt specialists and come up with debt solutions which are tailored to each unique situation. These debt agreements are an Australian Government initiative to help Australians with their debt repayments. They are registered debt agreement administrators who help with the prevention of Australians possessions being repossessed and to also avoid bankruptcy. You enter into an agreement to pay off your debts from your own form of income over a period of up to 5 years.
An Affordable Budget is Worked out
With a debt agreement, an affordable budget is worked out according to your income. Interest repayments are frozen and your creditors won’t be able to contact you. With a debt agreement, debtors are able to manage their unsecured debts such as credit card debt or personal loan debt. Trained debt agreement officers will assess whether a debt agreement will suit your cause or whether you qualify for a debt consolidation loan.
A Flexible Alternative to Bankruptcy
Personal Insolvency Agreements are insolvency options which are a legal and far more flexible alternative to bankruptcy. Understand exactly what will happen if you go bankrupt and compare that with the other options open to you. As the debtor, you agree to pay a certain sum of money over a specified period of time to repay your debts. If the amount which is paid to your Personal Insolvency Agreement is less than what you owe, the balance of the debt will be written off.
A debtor can propose a Personal Insolvency Agreement when they are insolvent. If the debtor has an Australian connection a Personal Insolvency Agreement (PIA) is another way a debtor can settle debts with creditors without going bankrupt.
Bear in mind that only unsecured debts can go into a Personal Insolvency Agreement. Creditors will either receive a lump sum payment from the debtor, payment arrangements with creditors can be made or another way is the transfer of assets to creditors or paying an amount to the creditors from the sale proceeds of assets.
With a PIA you are Still Free to Travel
With a PIA, the debtor appoints a controlling registered trustee who will do the negotiating with creditors and put forward a proposal to them. The creditors will be advised about the amount they can expect compared to what they would get if the debtor became bankrupt.
Of course there are a number of advantages to proposing a PIA such as the interest on your debt being frozen, you are still free to travel overseas whereas with bankruptcy you wouldn’t be able to. You also aren’t subjected to an assessment of your income each year like you would be with bankruptcy and you only pay what you can afford to repay.
Of course debtors will want to know about any consequences of entering into insolvency options such as a Personal Insolvency Agreement. Yes your name will be published on the National Personal Insolvency Index. Anybody who wants to know more about the consequences and call the toll free line of AFSA and have PIA explained to them. At a meeting of the creditors however, the creditors may vote in favour of the debtor becoming bankrupt.
With Bankruptcy a Trustee Manages Your Estate
When your debts are beyond control and causing you untold stress, bankruptcy in one of the insolvency options which is useful for when you can’t get any alternative arrangement worked out. A person can voluntarily declare themselves bankrupt. A person can declare themselves bankrupt by lodging a petition with the Insolvency and Trustee Service, known as ITSA. The Trustee will inform your creditors of your bankruptcy and administer your estate, investigating your past and current financial affairs.
When a person declares bankruptcy voluntarily, they will need to have a ‘Debtor’s Petition’ form filled in which lists all of their debts as well as their creditors and the sum of their debt. If the ITSA or Insolvency and Trustee Service of Australia accepts the application, the debtor will be informed of their rights and obligations.
You Face Restrictions with Bankruptcy
The standard period of bankruptcy is one to three years, but it can be extended. You’ll have restrictions put on you; your credit rating will be reduced, you can’t take loans and you can’t travel. Bankruptcy comes to an end when there is full payment of debts to creditors or when the creditors are satisfied after accepting a lesser amount of re-payment.
Once you have been declared bankrupt by the courts you are protected from your creditors and they cannot take any action against you. Even the banks are prevented from pursuing their debts against property that is secured. There isn’t a minimum amount for someone to declare bankruptcy, but if a person has declared bankruptcy a number of times, the Official Receiver in Bankruptcy can reject an application.
Explore Your Options
Insolvency is a complicated issue and fortunately there are many skilled lawyers who specialise in insolvency options, and it is to your advantage to get all the legal advice you can when forging ahead with either company or personal insolvency and understand which one will benefit you the most.