how-to-solve-your-personal-debt-problems

Due to the Covid-19 pandemic, repayments on $192 billion worth of housing loans have been temporarily deferred. Some of these borrowers have lost their jobs or own businesses which are in financial difficulty. A large number of them have other debts they cannot pay such as credit card debt, personal guarantee debt from a failed business or tax debt.

So, what are your options to solve your personal debt problems?  If you’d like to find out, please give us a call at 1300 906 966 for a free, no obligation consultation.  Or, continue reading below.

Informal Debt Settlement

Often, the best option is to negotiate a settlement with creditors. This allows you to settle your debts without the adverse effects of going bankrupt. And this is where we can help you. Depending on your circumstances, we can:

  • Approach your creditors and request that they put a hold on recovery actions against you;
  • Assess your financial situation and formulate a proposal to be presented to your creditors; and
  • Present to your creditors with a proposal and advise them of the benefits in accepting the proposal.

From our experience, creditors are open to accepting a sum lower than the debt owed if it can be established that the debt owed cannot be paid in full. However, negotiating settlements with creditors is often only viable if you have funds you can contribute to a reasonable settlement proposal and you do not have a significant number of creditors. If you have a large number of creditors it is often difficult to get most or all of them on board with a settlement and if there are a few holdouts it can mean you can’t settle your debts. You can’t ordinarily compromise your core tax debts, however, the ATO is often amenable to reducing or waiving interest and penalties.

Bankruptcy

Bankruptcy is a process which is intended to give you a fresh start without the burden of unpayable debts. You can voluntarily go bankrupt and appoint someone to manage your bankruptcy, known as your bankruptcy trustee. If you would like we can be your bankruptcy trustee and assist you with the process of becoming bankrupt.

These are some of the key points that you should be aware of however before going bankrupt:

  • Bankruptcy releases you from most debts, with some exceptions including HECS/HELP debts and Child Support liabilities.
  • Bankruptcy lasts for 3 years and 1 day.
  • Your name will be permanently recorded on the National Personal Insolvency Index (NPII) which is a public register that can be searched for a fee.
  • Credit reporting agencies will record your bankruptcy and this will affect your credit rating.
  • Your assets, with various exceptions, will be sold by the bankruptcy trustee to recover funds for the benefit of your creditors.
  • Investigations will be conducted by the bankruptcy trustee to ascertain whether there are transactions which you have entered into which may give rise to recovery actions.
  • You will have to apply for the bankruptcy trustee’s consent before you can travel to another country.
  • Half of your after tax income above a certain threshold will be paid to the bankruptcy trustee.

Enter Into A Part IX Debt Agreement

A debt agreement is another option that may be available to you if you have unmanageable debt. There are benefits to debt agreements and we have previously discussed it here and here. Some of most significant benefits are:

  • Avoiding bankruptcy and its effects.
  • You can continue being a director of your companies.
  • You may be able to keep your assets.
  • You can propose a manageable payment amount in instalments.
  • Unsecured creditors cannot take action against you to recover their debts.
  • Interest does not accrue on your debts from the date you submit your proposal.

A debt agreement is proposed to creditors under Part IX of the Bankruptcy Act and some of the things you need to be aware of can be found here. We can assist you in deciding whether this is the best option for you and if it is, formulate a proposal to be presented to your creditors. Many creditors are willing to accept a debt agreement proposal as it usually provides for a better return than if the debtor is made a bankrupt.

Put Forward a Proposal For A Personal Insolvency Agreement

A personal insolvency agreement (PIA) is an alternative to bankruptcy to deal with your unmanageable debts.

A meeting of creditors is convened by a trustee who you appoint to investigate your affairs and report to creditors on a proposal you put forward to settle your debts. Your proposal to settle your debts will generally provide for you to pay a set amount in a lump sum, from the sale of your assets or by instalments. The amount payable will be less than the amount of the debts which you owe.

For the proposal to be accepted, you will require the majority in number and at least 75% of the dollar value of creditors who attend and vote at the meeting, to vote in favour of the proposal. If your proposal for a PIA is accepted by creditors:

  • You may retain certain assets or continue trading your business.
  • All of your provable unsecured debts are included in the PIA, even if not all creditors vote on your proposal.
  • Unsecured creditors cannot take action against you to recover their debts.
  • You are only required to pay the lump sum, contributions or other amounts you agreed to make under your proposal.
  • You avoid most of the restrictions of bankruptcy.
  • Subject to complying with the terms of your PIA, you are released from your provable unsecured debts and you are only required to pay the lump-sum amounts, regular instalments or other contributions you agreed to pay under your proposal.

Contact us for Assistance

If you have unmanageable debts or you think that you will struggle to pay your debt at some point, don’t’ delay things further. Act now and get in touch with us on 1300 906 966 or send us an email at mail@cactusconsulting.com.au to arrange a free confidential initial discussion.

Posted on 09-04-21 in Bankruptcy Assistance, Personal Debt Solutions, Personal Debts.