Bankruptcy in Australia - Choices, Choice, Choices

When it comes down to Bankruptcy Australia, there are a lot of options that we get given depending on who we are, who we speak with, and exactly what has gone wrong. The most common confusion I see with Bankruptcy is when it comes to choosing between Debt Consolidation, Personal Insolvency Agreements, and Bankruptcy itself.

Should I consolidate my debts?

When it comes to Bankruptcy in Australia, most of the info you receive on this subject matter will reflect the interests of the advice giver. That is why, if you call a debt consolidation firm, I can guarantee you they will tell you to consolidate your debts. The debt consolidation business is a multi-billion dollar industry making money in one very basic way: charging you a fee for aiding you wrap all of your credit card and personal loans into a single neat and tidy bundle.

I hate to tell you this but these guys aren't doing it for free. Please don't misunderstand me: if you consider your financial problems in Australia could be solved by paying less interest, then go ahead and check out the choices. Even a small amount of interest saved over years quickly adds up.

Normally I find if you read this blog you've most likely attempted to consolidate your debts already and come to the following realisations similar to these:

• Your credit rating is no good, and your credit file already has defaults on it so nobody will offer you a loan, consolidated or otherwise,.

• By the time you work all of it out, you're so far down a hole that saving a little bit of interest just won't make a great deal of difference,.

• You've most likely arrived at the point where you've had more than enough, you're emotionally burnt out, you can't go on yet another day ignoring blocked calls on your phone, ignoring the demands in the mail and so on.

Personal Insolvency Agreements

So when it comes to Bankruptcy in Australia, what's the difference between a Debt Agreement and a Personal Insolvency Agreement?

Adaptability is the main thing Personal Insolvency Agreements (PIA) have in their favour. They're also administered by a registered and - might I add - regulated trustee featuring the government trustee ITSA, and not a private business that advertises on TV. Basically this process resembles Debt Agreements (DA): The trustee holds a meeting with the people you owe money to and they arrange a deal on your behalf. You can offer a lump sum settlement figure or take part in a payment plan, or maybe you can offer them assets instead of cash. This may sound acceptable when it comes to the problems with Bankruptcy - that is until you discover that one of the obstacles with PIA's is that 75 % of the people you owe money to have to come to an understanding the deal. If they don't, your proposal is denied or will need to be renegotiated.

Generally the people you owe money prefer all their money back plus interest. Sometimes they'll opt for beneath the amount you owe them - it's typically a percentage of the debt - but let me stress this aspect: because of all the variables involved in the negotiation process to put together a PIA its difficult to put a figure on what the people you owe money to will truly settle for.

Most of the time you'll have to pay back 100 % of the debt owed. This is not just because your creditors are greedy or have a mean streak, it's because the administrators take 20 % of whatever is agreed upon with the people you owe money to. That applies whether you use a private company for this process or ITSA, the government body setup to administer to these PIAs.

When it comes to Bankruptcy and insolvency I've come across creditors going for less 80 % on rare occasions, but that usually only occurs with a public company entering into receivership owing huge sums of money (the kind that makes the news). If you are were owed $10million and you know the people who owe you the money have a team of shrewd lawyers and some very clever structures in place and they offer 5 % of the debt, you might take it and be grateful. Sadly, ordinary punters like you and me in Australia aren't going to get that lucky!

If you wish to find out more about what to do, where to turn and what questions to ask about Bankruptcy, then feel free to contact Fresh Start Solutions Australia on 1300 818 575, or visit our website: www.freshstartsolutions.com.au/bankruptcy-Australia.