When most people think of insolvency, or being insolvent, they think of it as something that is forced upon you. Companies and businesses are forced into liquidation, or individuals are made bankrupt by one of their creditors… many people do not realise that declaring yourself insolvent can be voluntary, and  that it can also be a beneficial decision to make.
Being insolvent is defined as being unable to pay your debts as they fall due. Many people may not realise that they are actually insolvent, because they are managing to pay their debts; but they are doing so with their credit cards, “robbing Peter to pay Paul”. Basically, if you have more debt repayments than you have real money to pay them, you are insolvent.
If you are insolvent, and you are incapable of remedying the situation on your own, you have two options. You can declare Bankruptcy, which means that you will no longer make repayments towards your debts, but if you have assets with available equity or sufficient income, these will be applied to your debts by your Bankruptcy Trustee. To voluntarily declare yourself Bankrupt, you would submit what is known as a Debtor’s Petition to the Australian Financial Security Authority. You can do this directly with them and have them act as your Bankruptcy Trustee, or you can go through a private Trustee of your choosing.
Your other option is to enter into a voluntary insolvency agreement, which would be either a Debt Agreement or a Personal Insolvency Agreement. These agreements are like legally binding payment arrangements, whereby you offer a certain amount of money towards your debts and, once complied with, you are thereby released from them. They are an initiative of the Australian government designed to assist insolvent individuals to manage their debt and avoid declaring Bankruptcy.
Many people have used a voluntary insolvency agreement to ease the pressure of their financial burdens and to avoid having to declare Bankruptcy. They are not without their consequences, but they do offer relief from the pressures of over-indebtedness and a fresh financial start. If you are unable to pay your debts as they fall due, call us on 1800 462 767 and ask our experienced consultants about your voluntary insolvency agreement options.