Some of the consequences of Bankruptcy cannot be known for certain until you actually go ahead with it, because they depend upon the findings of your Bankruptcy Trustee’s investigations. There is one thing that is certain, though, which is that it is going to affect your credit file.
Declaring yourself Bankrupt will place a mark on your credit file for a period of seven years from the day your application is accepted. You will find that whilst you are a Bankrupt person you are not actually allowed to apply for credit over a certain amount without declaring the fact that you are Bankrupt. It is probably easier to assume, though, that you will not be applying for credit at all whilst you are Bankrupt, which is usually for three years.
So when you come out of Bankruptcy there will still be a four year period where you will have a mark on your credit file. You may find, however, that having this default is not as bad as it sounds. For one thing, you will have just spent three years living entirely without credit and instead using your own available funds. You will have learned to budget, and without any creditor repayments to make you may have managed to put some money into savings.
Also, just because you have a default against your name, that does not necessarily mean that you will not be able to get credit. If you are earning a good income and you have some savings behind you, you may find that the default will not stop your application. And if you are applying for a secured loan to purchase an asset, or you have an asset that you are willing to put up as security, you will be considered a lesser credit risk than if the credit was completely unsecured.
The default on your credit file when you declare yourself Bankrupt is designed to give you a fresh start, to stop you from being able to keep adding to your debt and give you time to become financially rehabilitated. And with some planning and saving during your years as a Bankrupt person, you will find that credit will still be available to you in the future – if not during the seven years that you have a default, then after, when the mark is completely wiped from your credit file. If you are considering Bankruptcy and are concerned about the effect it will have on your credit history, call our consultants today on 1800 462 767 for free and impartial advice on gaining credit after Bankruptcy.

The feeling of not being in control of your debt is fraught with negative connotations and misconceptions. Terms like “black-listed”, “insolvent” and “Bankrupt” are often confused and misconstrued, and lead to undue feelings of guilt and shame. For many people find themselves “black-listed” even if they have been paying their debts; you can be insolvent without having to go Bankrupt; and if you are facing Bankruptcy, nine times out of ten, it will not actually be your fault.
To be insolvent is simply to be unable to pay your debts as they fall due. So as you can imagine, becoming insolvent is actually quite easy. You might have an unexpected expense, or suffer a drop in income through illness or some other reason. It can be a temporary thing, something that you can recover from when your situation returns to normal. Some people are actually insolvent without even realising it, as they are paying their debts, but using their other credit facilities to cover those payments. It is when you realise that you are insolvent that you then need to look at your options for resolving the situation.
Bankruptcy is one such option. It is not synonymous with insolvency in the sense that one necessarily means the other. Rather, it is a process that is available to insolvent people to remove the pressure of unmanageable debt whilst also providing the fairest possible outcome for the creditors involved. It is also, for many people, a last resort option.
If you are insolvent, that is, unable to pay your debts as they fall due, but you still have a regular income and can make some payments towards your debts, there are certain steps that you can look at before Bankruptcy. The first would be to apply for hardship with each of your creditors. They will assess you individually and may grant you certain temporary reprieves, such as putting a hold on payments, or freezing your interest for a few months. If this turns out to be insufficient to solve your problems you may have the option of proposing a government regulated repayment plan. This is called, depending on your level of income and/or debt, a Debt Agreement or a Personal Insolvency Agreement. They are both, in essence, the same thing; a formal and legally binding alternative to Bankruptcy that does not carry with it all of the negative consequences that Bankruptcy does.
If you are struggling with debt, a clear understanding of your situation and your available options is the first step toward easing the pressure. Here at Debt Free Australia we are fully qualified and experienced in all aspects of personal insolvency, and can give you the advice you need to make an educated decision about your financial future. Call us on 1800 462 767 for impartial and obligation-free debt advice.

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.

One of the biggest concerns that people have when they are considering Bankruptcy is the effect it will have on their home, either the one that they already have, or the one that they are hoping to get; “I will never be able to get a home loan” is one of the most common things we hear over our Bankruptcy advice line. This fear, though, is a misconception.
When you declare yourself Bankrupt there are two records kept. One of them is a permanent record on the National Personal Insolvency Index, which is a government record of acts of insolvency. This index is very rarely looked at by banks though, as they have to pay a fee every time they search it – it would simply cost them too much! The other record is a default on your credit file, and that one lasts for seven years.
It is an obvious fact that whilst you are Bankrupt you will not be applying for a home loan. You are only a Bankrupt person, though, for three years, providing of course that you comply with all of the instructions of your Trustee. This means that after the three years of your Bankruptcy you will have four years left during which there will be a mark on your credit file.
Remember, though, that a default does not always stop you from getting credit. It will most certainly have an effect on the application process, but you could still be granted a home loan on the basis of other criteria, such as having a large deposit and a good income and savings history. You may find that joint mortgage applications are looked upon more favourably if one of you has a clean credit file. And another important thing to remember is the simple truth that if you are considering Bankruptcy, you are most certainly not in a position to be considering a mortgage anyway. For some people, declaring Bankruptcy gives them the fresh start they need to be able to start saving for a deposit, so when the seven year default period is up, they are actually in a better lending position than they were before the Bankruptcy.
If your financial situation is such that you are genuinely considering Bankruptcy, you should not let the fear of not being able to get a mortgage stop you. You need help now, and the longer you delay, the longer you delay the time when you will actually be in a position to apply for a mortgage. The mark on your credit file from Bankruptcy may not actually stop you from being granted a home loan, and even if it does, it is only for seven years. For more information on Bankruptcy and how it might affect your financial future, call one of our debt consultants today on 1800 462 767 and find out everything you need in order to make an informed decision.

If you are struggling to pay your credit card debts you can try to come to some sort of temporary arrangement with your creditors. This is usually known as hardship, a process by which they will assess your application for assistance and, if they deem you qualified for it, may do such things as freeze the interest on your account for a period of time, or grant you a moratorium on your repayments. These arrangements are not binding on your creditors though, and they are not permanent (the average term is around 3 months); they are known as “informal” arrangements.
If you are unable to come to such an arrangement with your banks, or if it is not going to give you as much assistance as you need, you may want to consider a “formal” arrangement. Formal arrangements to manage your debt are legally binding, mediated by a third party, and governed by the body that regulates insolvency actions in Australia, which is the Australian Financial Security Authority. There are two such arrangements, which allow you to settle your debts with your creditors at a reduced amount, and these are known as a Debt Agreement and a Personal Insolvency Agreement.
Debt Agreements and Personal Insolvency Agreements are the same sort of arrangement, although a Debt Agreement is usually the most popular, as their availability to you is dependent on how much you owe, how much you earn, and what you have in the way of assets. Essentially, the agreement is a legally binding one whereby you will pay a certain amount into it over a period of 3-5 years and, providing it is completed, this amount is accepted in full and final settlement of all of your unsecured debts. There are many advantages to choosing a formal solution such as this over an informal one, in that the interest on your debts is frozen, it is binding and permanent, and unlike individual informal arrangements that must be negotiated and agreed to by all of your creditors separately, a formal arrangement encompasses all of your unsecured debts; you just need the majority of them to accept it.
If you feel that you are in need of a formal solution to your debts such as a Debt Agreement, call one of our friendly consultants today on 1800 462 767. We can help you to establish whether or not it might be a good option for you, and give you all of the information that you need so that you can make an informed decision.

One of the major advantages to a Debt Agreement is that, unlike an informal arrangement which can be refused or broken by your creditors, it is legally binding. All your need is for the majority of your creditors to accept it, and all of them will then be bound by it. A Debt Agreement is a two-way street though, and if it’s going to be legally binding on your creditors, it’s only fair that it is binding on you too. In saying that, it is possible to break a Debt Agreement contract. But there are processes to be followed, and consequences for not completing it.
There are three ways by which a Debt Agreement contract can be broken:

1. Self termination – the debtor (you) lodge a termination document with AFSA, which the creditors then vote on; you need the majority to accept the termination
2. 6 month Statutory Default – if you do not make a contribution in a 6 month and 1 day period, it is automatically terminated
3. Creditors termination – your creditors can have your Agreement terminated if you are not meeting your obligations

You may need to terminate your Debt Agreement due to extenuating life circumstances, eg. losing your job, or falling seriously ill, in which case it is unavoidable and the negative effects most likely inconsequential. If you simply do not wish to continue, though, you should carefully consider the following:

• Your debts will be reinstated
• They will start incurring interest again, and it may even be back-dated
• Your credit file will not be updated to show that it has been completed, and instead will show as “unfinalised” until the default is wiped out after seven years

To give your Debt Agreement the best chance of success you must have a detailed budget in place and a genuine desire to see the end of your debt problems. Your Debt Agreement Administrator has an obligation to you to ensure that your payments are (barring unforeseen circumstances) reasonable and sustainable, and that you have been fully briefed on your commitment and its consequences. It is then up to you to ensure that your obligations are met and the Agreement is completed. If you fail to complete it, yes, it can be broken – but a Debt Agreement provides you with a way to actually pay out your debt, not just defer it for a while, so it would be a genuine shame if you did not complete it.
For free and impartial advice on Debt Agreements and both their pros and cons, call us at Debt Free Australia on 1800 462 767.

A Debt Agreement Administrator can be a company or a person who is licenced and registered with the Australian Financial Security Authority (AFSA) to set up and administer Debt Agreements.
Before you pay any money to get help with setting up a Debt Agreement, make sure that the person or company who you are dealing with is registered with AFSA. Our CEO is a fully licenced insolvency practitioner, so if for some reason you don’t wish to proceed with a Debt Agreement and you need to consider other insolvency services like Bankruptcy  or a Personal Insolvency Agreement your case can be handled here.
Debt Free is registered and licenced with AFSA and we have been helping Australians with Debt Agreements since 2006, so we have a proven track record as a Debt Agreement Administrator. We will carry out a debt assessment for free, so if you want to see what debt solution is most appropriate for you, give us a call on our toll free advice line 1800 462 767.

What is a Controlling Trustee?
A Controlling Trustee is usually an insolvency accountant (i.e. an accountant who is registered with AFSA as a Trustee in Bankruptcy) but a solicitor can also act as a Controlling Trustee. If you appoint a solicitor, they need to be a member of the Insolvency Practitioners Association of Australia. One advantage of appointing a Registered Trustee in Bankruptcy is that they can act as your Controlling Trustee and then act as the Trustee of your Personal Insolvency Agreement (if your proposal gets accepted by your creditors). A solicitor cannot act as the Trustee of your PIA.
Most people wouldn’t realise that the process to set up a Personal Insolvency Agreement is split into 2 parts.  The first part is the Controlling Trustee period (which usually lasts for 25 business days) and the second part (if the agreement gets accepted) is to administer the Personal Insolvency Agreement.
How do I appoint a Controlling Trustee?
A Controlling Trustee is appointed once you execute a document known as a 188 Authority. Once executed, the authority cannot be revoked (i.e. cancelled or withdrawn) and the Controlling Trustee will act for a minimum period of 25 working days (unless it is extended which we will explain below).
If you are a married couple and you have joint assets and or debts you have the option of submitting a joint proposal.  Submitting a joint proposal will bring many advantages including:

• A streamlined administration process;
• Reduced costs;
• Your debts will be pooled and settled by the one proposal.

What does a Controlling Trustee do?
Once appointed, your assets will be under the control of your Trustee so you won’t be able to sell them or deal with them in anyway without your Trustee’s permission.  Your trustee will immediately commence investigations, prepare a report to your creditors and then call a meeting of creditors.
Below is a step by step guide as to what a Controlling Trustee will do.
Complete an investigation
The Controlling Trustee will investigate what assets you own or have disposed of in recent years.  If you have disposed of assets in recent years, the Controlling Trustee must form a preliminary view if those assets could be “clawed back” in bankruptcy.
 Prepare a report
The Controlling Trustee will prepare a report to your creditors, which will include:

• Your financial details (including your income & expenses, your secured and unsecured debts & any assets owned outright);
• The results of the investigation (as discussed above);
• Your proposed Personal Insolvency Agreement; and
• A recommendation from your Controlling Trustee as to whether the creditor’s interests would be better met by accepting your proposal or whether their interests would be better met by you being made bankrupt.

Hold a Meeting of your Creditors
The Controlling Trustee must hold a meeting of your creditors within 25 business days of being appointed which you will need to attend by phone or in person.  This meeting may be adjourned if additional investigations need to be completed by the Controlling Trustee. If an outcome isn’t decided by creditors within 4 months of the 188 authority being signed, the authority will lapse. You cannot sign another 188 authority within 6 months of signing the first authority.
In most cases an outcome is usually decided at the first meeting.  For the proposal to be accepted, creditors present and voting at the meeting must represent a clear majority and hold 75% of the debt (calculated in value).
What happens after the Meeting of Creditors?
If creditors accept the proposal the Controlling Trustee will end and a Trustee to administer the Personal Insolvency Agreement will be appointed.
If the creditors reject the proposal, they will usually pass a resolution for you to file a debtors’ petition and become bankrupt.
If you are thinking about appointing a Controlling Trustee so you can propose a Personal Insolvency Agreement then give us a call.  We have a Trustee on staff who will be happy to help.  Call us now on our toll free line 1800 462 767.
 

What is a Debt Agreement Proposal?
A Debt Agreement proposal is an offer made in the form of a contract between you, your creditors and your Registered Debt Agreement Administrator. It must contain your personal financial information and your offer to settle your unsecured debts. Your proposal must be set out in the approved form supplied by AFSA and the prescribed processing fee must be paid before AFSA will distribute it to your creditors for voting.

How do I go about setting up a Debt Agreement Proposal?

Most people engage the services of a Registered Debt Agreement Administrator (RDAA) to help prepare the Debt Agreement Proposal. Debt Free is a RDAA and we will start the process by collecting the following information from you:

• Your personal details
• Your salary
• Your expenses
• Your unsecured debts
• Your secured debts
• Your assets owned outright

Once this information has been collected and validated we will be able to work out how much you can afford to repay to your creditors.  We usually recommend that you make regular payments which match your payroll cycle (like weekly, fortnightly or monthly).  As part of our assessment process we will also work out how many years your Debt Agreement will need to run for.  Most agreements run for between 3 to 5 years but we assess each case individually to tailor the proposed dividend to what we think your creditors are likely to accept. There is no point in spending the time & money in preparing a proposal unless it is likely to be accepted by your creditors.
Here at Debt Free we have a unique debt assessment system which we have developed over a number of years which will work out the best Debt Agreement proposal to suit your budget and also meet the needs of the your creditors.
If you are thinking about proposing a Debt Agreement give us a call.  We will do a financial assessment for free to make sure that a Debt Agreement suits your individual circumstances.  Call us now on our toll free line 1800 462 767.
 

Entering into a Debt Agreement will not always mean that you will have to sell your car but given many different scenarios can arise each case needs to be reviewed individually. At Debt Free Australia we offer a free debt assessment.
Let explore some of the more common situations we come across.

What happens if my car is leased?

If you have a leased car and you want to keep it, then most people simply continue to pay the lease payments in the ordinary course.  When we help you prepare a Debt Agreement proposal we will first prepare a budget to make sure that you can continue to pay for all of your existing financial commitments as well as your debts.
If you have no equity in your car or negative equity in it (meaning the amount outstanding on the lease exceeds the value of the car) then you have 2 choices:

1. I want to keep my car – If you want to keep your car all you need to do is to simply keep paying the lease payments in the ordinary course.  What you need to be mindful of is whether a “balloon payment” or “residual payment” will become payable during the Debt Agreement.  This may create an issue as you will need to either “refinance” the lease or pay it out.  If you have negative equity in the lease at the time that you enter into the Debt Agreement, the leasing company would be entitled to claim for dividends from your Debt Agreement for the “estimated shortfall”.  This may affect the estimated dividend to your unsecured creditors.
2. I want to sell my car– If you don’t want to keep your car (due to the negative equity in it) then you should surrender it to the leasing company prior to entering into your Debt Agreement.  This way, you will be able to include any “actual shortfall” from the sale of the car in your Debt Agreement.  Going down this path will eliminate all of your debts and will allow you to start afresh.  Of course, many factors need to be taken into account before you would consider this – for example:
   1. Can you afford to buy a car outright if you surrender your leased car?
   2. It is unlikely you will be able to lease another car until your Debt Agreement is successfully completed.

Is there a limit on the value of the car I can have?

The value of your car or your combined assets (including the equity on your house) cannot exceed $103,121.20. If the equity in your combined assets exceed this amount then you would need to consider a Personal Insolvency Agreement instead.

Can I sell my car later?

If you wish to sell your car after you have entered into a Debt Agreement, then you will be free to do so.
If your car is leased it is unlikely you will be able to lease another car until your Debt Agreement has been successfully completed.  Whilst you are subject to a Debt Agreement you can’t apply for credit exceeding $5,259, without disclosing to the party that you are in a Debt Agreement.

Will my car be protected under the Debt Agreement?

Once you enter into a Debt Agreement you will be protected against any legal action your unsecured creditors may wish to take.  This means that they will be prevented from commencing any bankruptcy proceedings against you or obtaining any type of writ against your car. As long as you fully comply with the terms your Debt Agreement (i.e. you make the payments as required) you will be legally protected.
This is one of the biggest advantages of entering into a Debt Agreement compared to bankruptcy.
If you have a car (either leased or owned outright) and want to protect it, then give us a call.  Debt Free Australia are industry leaders in personal insolvency services. We won’t charge any fee until we have fully assessed your case and have confirmed that a Debt Agreement is the best solution for you. Call us now on our toll free line 1800 462 767.