Is your money situation getting you down? Do you have more debts than you can handle?
No matter what the reason, many people find themselves in debt and struggle along in silence, not wanting to admit to the problems or not knowing how to fix them.
Once you start to really think about the issues and research a solution, you will find that you do have options.
The top 3 reasons why you might declare yourself bankrupt are:
• You want the harassing phone calls to stop
• You can’t pay back all or any of the debt
• You want to start again with a clean slate
Although declaring bankruptcy is attractive, there are some consequences that you should be aware of, and it is handy to know something about the alternatives too. Let me explain.
There are several ways to rid yourself of debt and the choice you make will depend on your circumstances and who you take advice from.
Your options include:
• Enter into a debt agreement
• File for personal insolvency
• Debt consolidation
• Declare bankruptcy
There are risks and advantages to all the options and it is wise to talk to a reputable debt administrator who can advise you on the best course of action that suits your particular circumstances.
A debt agreement and personal insolvency will mean that the harassing phone calls stop. However, you will have to pay back your debts over time and the agreement or proposal does not release the pressure of debt for as long as it takes you to pay back the debt. Depending on the level of your debt in relation to your income, you may find that it is still stressful because you still have the debt for many years. Your name will be entered on the National Personal Insolvency Index (NPII) and this may affect your employment and borrowing opportunities.
For more information on debt consolidation, see our article.
In comparison a voluntary bankruptcy will relieve you of the harassing phone calls AND the need to pay back all or most of the debt. So you get relief from the pressure right away. Your name will be entered on the NPII and this may affect your employment and borrowing opportunities – just the same as if you entered into a debt agreement or personal insolvency.
However, it is important to understand that declaring voluntary bankruptcy may affect your assets so it will depend on the assets that you stand to lose. You will also get a bad credit rating for 7 years – but if you already have a bad credit rating because of your debt, nothing much has changed., although your name on the NPII will be there for life. Once again a debt administrator should be able to give you the information necessary for you to make an appropriate decision.
Let me give you a few statistics. There were close to 21,000 bankruptcies in Australia last financial year. This is the lowest annual figure in 9 years. On the other hand debt agreement activity levels for the same period were the highest on record, while Personal Insolvency agreements were at their lowest levels in 6 years.
So, while the number of people taking out debt agreements has risen, there were fewer people declaring bankruptcy and fewer entering into PIAs. One reason for this is that in recent times more debt administrators are recommending debt agreements. But is this the best course of action for you?
While you are talking to a debt administrator, remember, for you a debt agreement may not be the best way to go.
Some people enter into these agreements not fully understanding the impact they will have. They will phone a debt administrator, feeling stressed and overwhelmed and they just want a solution to their problems. Some debt agreement administrators may tell you that they can get rid of your debt in minutes. But that is not always the case. Sometimes this will mean that you are locked into years of paying back the debts. So you need to explore all the options and know their consequences.
For example, many people think that if they go bankrupt, all or most of their subsequent earnings will be ‘quarantined’ to pay their debts. That is NOT the case. The reason that voluntary bankruptcy exists is because government recognizes there are people who find themselves in this position and who need an opportunity and the capacity to start again.
And another thing – it is not shameful to declare yourself bankrupt. It happens to thousands of Australians every year, as the statistics show. The government recognizes that there are people who simply are not able to pay their debts due to circumstances like unemployment for example. Bankruptcy, therefore, is a way to protect the people who find themselves with too much debt.
So therefore voluntary redundancy could be what you need to allow you to get back on your feet and get on with your life.
Bottom line is you need to seek advice from a debt administrator and then weigh up the best course of action for you. Arm yourself with as much information as you can before making a decision. Find yourself a reputable administrator by clicking on the link or phone 1300 653 962. They will give you a free consultation and enough information so that you can feel confident that you are getting the right advice.
Importantly, don’t let your debt worries get on top of you. Now is the time to act. The longer you leave it, the more likely you are to get deeper into debt and the harder it will be to find an appropriate solution.