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.
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