Get Advice about your debt problems
Asking for help isn’t easy.
This is especially true when it comes to financial matters.
Maybe you feel ashamed or too proud to admit that you have debt problems. Whatever your concerns or anxieties are, you should never ignore the underlying problem. It is very unlikely that the problem will solve itself. Ignoring the problem can lead to unnecessary stress. Take 2 minutes to complete our debt stress test.
If you feel your debt problems are starting to affect your general well-being, you should immediately consult with a personal debt advisor and possibly a financial counsellor as well.
Here at Debt Free Australia, we are committed to provide a high quality service. Our personal debt advisors are all highly trained and have years of experience with helping people solve debt problems. We won’t pressure you into a product which isn’t suitable or which won’t solve your problem. We have been operating in Australia since 2006 and we have built a strong reputation in helping Australians getting back in control of your debts.
So why wait? Call today on 1800 676 598 or use the form below.
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How do I set up a Personal Insolvency Agreement?
What is a Personal Insolvency Agreement?
A Personal Insolvency Agreement (PIA) is an alternative to Bankruptcy and is laid out under Part X of the Bankruptcy Act. For this reason a PIA is also known as a Part X. A PIA is similar to a Debt Agreement in that it is a legally binding agreement between you and your unsecured creditors to pay back as much as you can afford to repay in order to avoid bankruptcy.
A PIA can only deal with your unsecured debts (i.e. credit cards, personal loans, cash advances, guaranteed company debts or any shortfall amounts from the sale of secured assets). If you wish you can keep your secured assets (ie your house secured by a mortgage or your car subject to a lease) as long as you can afford to keep making the normal repayments. If you don’t wish to retain these assets you can surrender them to your financier prior to entering into the PIA and if there is any shortfall on sale, then that shortfall can be included in the PIA as an unsecured debt.
A typical agreement is structured over a period of time (usually with regular payments, ie weekly, fortnightly or monthly payments over 3 to 5 years). Some agreements can be structured with a lump sum payment/s if you can sell an asset or your family is prepared to contribute a lump sum amount to help settle your debts.
Who can help me set up a Personal Insolvency Agreement?
To set up a PIA you need to appoint a Controlling Trustee. Only a Registered Trustee in Bankruptcy or a solicitor can act as a Controlling Trustee. Before you select any company to help you with a PIA, make sure that they have a Registered Trustee or a solicitor on staff who can accept the appointment. You don’t want your case passed onto another company midway through the process. Here at Debt Free Australia, we have a Registered Trustee in Bankruptcy on site who can accept your appointment and help you through the process from beginning to the end.
It will be our role as your Controlling Trustee to help show your creditors what they would receive under your proposed PIA and compare that outcome to what they would receive if you went bankrupt (ie for your creditors to accept your proposal we need to be able to show them that they would receive more under your proposed PIA than what they would receive if you went bankrupt).
In preparing the bankruptcy outcome, we will need to investigate the following:
- if any property has been transferred or sold at under value which could be recovered under bankruptcy;
- if you would be liable to pay compulsory income contributions in bankruptcy; and
- place a value on your assets which would be sold under bankruptcy.
Lastly lets explore the most common questions people ask before they sign up for a PIA
Can I keep my car?
- Most people who enter into a PIA, do keep their car. However, if your car is leased and you can’t afford the repayments, then you may need to surrender the car to the financier prior to entering into the PIA. If there is a shortfall on sale, don’t worry as this shortfall amount can be included in the PIA as an unsecured debt. If you can afford the repayments then you can keep paying them as usual and keep your car.
Can I keep my house?
- Most people who enter into a PIA, do keep their house. However, if your house is subject to a mortgage and you can’t afford the repayments, then you may need to surrender your house to the financier prior to entering into the PIA. If there is a shortfall on sale, don’t worry as this shortfall amount can be included in the PIA as an unsecured debt. If you can afford the repayments then you can keep paying them as usual and keep your house.
Will I ever be able to get a mortgage again?
- This will be at the discretion of your bank once you complete your PIA. As the laws currently stand there will be a standard 7 year default placed on your credit rating from when you lodge your PIA proposal. However, the government has recently changed the laws which will become effective in early 2014 which will make it mandatory for the defaults to be lifted once you successfully complete your agreement. Again, despite this change in the law, it will be at the sole discretion of the individual lenders and you will need to satisfy their lending criteria at the time of your application.
Will the PIA be advertised in the local papers?
- For your PIA to be accepted, a meeting of your creditors needs to be held. At this meeting, your creditors will be asked to vote on your proposal. This meeting needs to be advertised on the AFSA website, but it will be taken off a few weeks after the meeting, so it will only be public for a short period of time.
Can I keep my mobile phone & credit cards?
- You can keep your mobile phone but you will need to cut up your credit cards. You will need to replace your credit card with a debit card. It may be best to do this prior to entering into the PIA.
If you want to enquire about setting up a Personal Insolvency Agreement, please call us on our toll free advice line 1800 676 598 and we will arrange a free debt assessment.
How to get out of debt with good budgeting
Poor budgeting can worsen your debt problems. Creating a strict but realistic budget should be the first task for anyone in debt. All debt solutions require strict discipline and if you don’t stick to your budget you are unlikely to achieve your goal of becoming debt free.
In this article we talk about some tips as to what you should include in your budget.
A good budget has several important components. It must include all of your usual expenses, but it also needs to provide flexibility for unanticipated expenses (like medical expenses & car repairs etc). Unless you set aside some extra money for unanticipated expenses you are only going to disappoint yourself when you blow your budget.
It is also important to remember to allow for expenses which usually get billed on a quarterly or annual basis. Utilities such as council rates, electricity and gas are usually billed quarterly. Memberships (such as trade licences, professional registrations, sports registrations, roadside assist memberships etc) and some insurance policies are billed annually. It is important that you convert these expenses into weekly, fortnightly or monthly amounts so you keep enough cash to one side to pay for these when they get billed. So, if you get paid weekly, then we recommend that you set up a weekly budget and convert all expenses into weekly amounts as well.
Every budget also needs to make allowances for leisure and entertainment. You are unlikely to stick to your budget if you feel “tied down” to a bland and unsatisfying lifestyle. But remember, you should only “treat yourself” if you have achieved the goals set out in your budget.
At Debt Free Australia, we help people create strict but achievable budgets as part of our debt solution service. Our experience has shown us that people who follow a strict budget are far more successful in achieving their goals in becoming debt free.
We have experienced personal debt consultants who can help you. Call now on 1800 676 598 to arrange a free debt assessment.
Debt Consolidation loans explained & other alternatives available
Debt Consolidation loans explained
If you have multiple accounts and are struggling to remember the due dates for each account, you may wish to apply for a debt consolidation loan. A Debt Consolidation loan will enable you to combine all of your payments into one easy monthly payment.
The ease of only having a single payment each month to remember, will hopefully avoid the risk of missing any payments. Missing payments on your unsecured debts can cause you to incur additional costs in late payment charges and higher interest charges.
The main benefit of consolidating your debts into a single loan is that you will only have to manage one single payment every month instead of multiple payments. If you shop around and you have a good credit rating, you may qualify for a balance transfer. Some credit card companies offer promotional deals where you can transfer your existing credit card balances into a new credit card account and enjoy an interest free period (or a reduced rate of interest).
Before you apply for a debt consolidation loan, you need to prepare a household budget to make sure that you can afford such a loan. If you are struggling to meet the minimum payments on your existing credit cards, it is very unlikely that you could afford a debt consolidation loan and your application will most likely be refused.
What do we do?
Here at Debt Free Australia, we do not offer debt consolidation loans, but we do help people who have been refused a loan. Most people are refused debt consolidation loans for 2 simple reasons:
- “insufficient cash flow” to repay the loan (i.e. insufficient capacity to repay); or
- “poor credit record”.
Debt Consolidation alternatives
If you are struggling to make the “minimum repayments on your debts each month” then it is most likely that you are insolvent. If you are insolvent, you should consider a formal arrangement with your creditors which will make your on-going repayments more affordable:
To understand the differences between these solutions, we have prepared a comparison table.
If you need advice on the alternatives to debt consolidation, please give our highly trained consultants a call on 1800 676 598.
Refinancing to get out of debt
Refinancing debt may seem like a simple way to get out of debt, and for people with equity in their assets it can be very effective & simple to do. However, there are several issues you need to consider before refinancing your assets.
What is refinancing?
Refinancing involves cancelling your current home loan agreement (usually a home loan), and entering into a new home loan agreement with your current lender or a different lender. Before the lender will allow you to refinance your debts (i.e. increase the level of your loan) they will re-assess your income & expenses to make sure you have the ability to repay the loan. Depending on the amount of equity in the property (i.e. the difference between the value of your house and the amount you owe on it) your lender may require a fresh valuation to be done. Most lenders also have a loan to valuation limit. What this means is that the loan value cannot be more than a certain percentage of the value of the property (for example the loan cannot exceed say 80% of the value of the property). Every lender has different lending criteria, so you will need to make enquiries with your lender to see if you qualify for a refinance.
What are the benefits of refinancing?
If you qualify for a refinance, the benefits can be enormous. The main benefit is that the interest charged on most home loans is significantly less than the interest charged on unsecured debts (like credit cards or store cards).
Refinancing your unsecured debts, will also reduce the number of repayments you need to manage every month. In other words, it is much easier to manage a single payment to one lender, rather than keep track of several payments to different lenders (usually with each having different payment dates).
What are the disadvantages of refinancing?
When you refinance and pay out your unsecured debts, you need to make sure that you close your old accounts. If you refinance and pay out your unsecured debts, but continue to use the credit accounts for purchases, your overall debt level will obviously increase, which will worsen your situation.
Immediately after you refinance your debts, make sure you cut up your credit cards and replace them with a debit card.
If you need advice on refinancing your debts, call your current lender first. If your refinance application is refused, then give us a call on 1800 676 598 and we can discuss your alternatives.
Consolidate debt to solve your debt problems
No matter how careful you are, sometimes the financial pressure and stress of dealing with debt problems can cloud your decision making process. Some people try to ignore their problems in the hope that they will go away and others make rushed decisions without thorough research.
Solving a debt problem takes careful planning and depending on the level of your debts you may need professional assistance. We will try and explain some of the options which may be available to you, but if you need professional assistance it is best that you call us direct on 1800 676 598. We offer a free debt assessment.
You may have heard of the term debt consolidation. This is where you roll all of your debts into a single loan (also known as personal loans).
If you are employed and have a good cash flow a debt consolidation loan may be the best way to manage your debts. The loan will allow you to bundle your debts into one account. The new loan will have a set time period (usually between 3 and 5 years). This is a better way to manage debts for the following reasons:
- You only have one monthly payment (rather than having to make multiple payments on different days, i.e. it avoids the risk of forgetting to make repayments);
- You have a set period of time to repay the loan (so there is an end date when you will become debt free); and
- It will have a set interest rate (whereas your other debts may attract different rates of interest).
To be eligible for a debt consolidation loan, you will also need a good credit history. If you have a poor credit history, your loan is likely to be rejected.
If you are successful in obtaining a debt consolidation loan, make sure that you close the other accounts. Failing to close your other accounts (which you just paid out with the loan) could end in financial disaster.
Debt Consolidation alternatives
If your application for a debt consolidation loan is declined you may need to consider some alternatives.
Your options will depend on the seriousness of the defaults recorded on your credit file or the level of your debts. If you are struggling to pay the minimum repayments each month, then you are more than likely insolvent. Being insolvent will reduce your options to the following debt solutions:
To understand the differences between these solutions, we have prepared a comparison table.
If you need advice on solving debts, give our highly trained consultants a call on 1800 676 598.