Entering into a Debt Agreement will not always mean that you will have to sell your house, but there are some situations where you would need to sell it, which we will explain in this article.  There may also be circumstances where it may be more beneficial for you to surrender your house to your mortgagee and allow it to be sold. This is particularly the case if you owe significantly more on the mortgage than what the house is worth. If this is your situation, please read below for more information.

How does a DA affect my current mortgage?

If you wish to keep your house and your creditors have agreed to your Debt Agreement proposal, then most banks will not take any adverse action against you as the borrower as long as you continue to make the mortgage payments in the usual course.

What if I have equity in my property – will my creditors still agree to my proposal?

Having equity in your house again doesn’t always prevent you from entering into a Debt Agreement, unless the equity exceeds the amounts you owe your creditors or the equity exceeds the statutory thresholds.  Lets explore these two issues further:

1. If the equity in your house exceeds the statutory threshold amount of $103,121.20 then you will no longer be able to propose a Debt Agreement and would need to consider a Personal Insolvency Agreement instead;
2. If the equity exceeds the amounts you owe your creditors, then your creditors will most likely expect you to either:
   1. Refinance your mortgage to repay your debts; or
   2. Sell the house to repay them.

What if I owe more than what my house is worth?

If you owe more to the bank than what your house is worth, then you have 2 choices:

1. If you want to keep your house that will usually be fine as long as you can afford to keep paying the mortgage. The bank would, however, be entitled to claims for dividends from your Debt Agreement for the “estimated shortfall”.  This may affect the estimated dividend to your unsecured creditors.
2. If you don’t want to keep the house (due to the negative equity in it) then you should surrender it to the bank before entering into a Debt Agreement.  This way, you will be able to include any “actual shortfall” from the sale of the house in the Debt Agreement.  Going down this path will eliminate all of your debt and will allow you to start afresh.  Of course, many factors need to be taken into account before you would consider this (for example you would need to consider the property market generally – for example:
   1. are house prices going up or down?
   2. how much stamp duty and other costs would you lose if you sold?

Can I sell my house later?

If you wish to sell your house after you have entered into a Debt Agreement, then you are free to do so.  This flexibility is not available in bankruptcy.

Will my house be protected under the Debt Agreement?

Once you enter into a Debt Agreement you will be protected from any legal action by your unsecured creditors.  This means that they will be prevented from commencing any bankruptcy proceedings against you or obtaining any type of writ against your house. As long as you fully comply with 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 house and want to protect the equity in 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.

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 462 767 or use the form below.

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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 462 767 and we will arrange a free debt assessment.

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 462 767 to arrange a free debt assessment.

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:

1. “insufficient cash flow” to repay the loan (i.e. insufficient capacity to repay); or
2. “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:

• Debt Agreement;
• Personal Insolvency Agreement;
• Bankruptcy

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 462 767.

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 462 767 and we can discuss your alternatives.

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 462 767.  We offer a free debt assessment.

Debt Consolidation

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:

• Debt Agreement;
• Personal Insolvency Agreement; or
• Bankruptcy

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 462 767.

At Debt Free we offer a free and unique debt assessment. Our debt assessment is carried out using state of the art computer software which will find the best solution to suit your circumstances.
We have developed and refined this software over a number of years so you can be assured you will receive impartial and expert advice.
We will always look for the least drastic solution to help solve your debt concerns.
Our software will test to see if you are eligible for the following solutions:

1. Release of equity from assets
2. Informal arrangement
3. Debt Agreement
4. Personal Insolvency Agreement
5. Bankruptcy

Release of equity

If you own property and have sufficient equity in it then you may be able to refinance the property and repay your unsecured debts.

Informal arrangement

We will test to see if you can pay your debts back in full including interest over a reasonable period of time (i.e. up to 5 years).

Debt Agreement

If you are unable to pay back your debts in full over a reasonable period of time, it may be advisable to look at other options which may include a Debt Agreement.  We will test to see if you are eligible for a Debt Agreement.

Personal Insolvency Agreement

If you exceed the threshold limits set for a Debt Agreement, then we will look to see if you are eligible for a Personal Insolvency Agreement.

Bankruptcy

Bankruptcy is always the last resort but for people on a low income with little or no assets to protect, then it can be the best solution.
Don’t agree to enter into any debt solution service until you have had a thorough and expert debt assessment.  Here at Debt Free we will complete this assessment free of charge.
You can complete a preliminary debt assessment on-line now. We will then contact you to collect your source documents to complete the assessment. In the meantime, if you have any questions call our friendly and professional debt advisors on 1800 462 767.

Personal Insolvency Services include, Bankruptcy, Debt Agreements and Personal Insolvency Agreements.
These services can only be provided by a licenced and registered insolvency practitioner. Before you start dealing with any company, make sure they are fully licenced and registered with AFSA.
There are 2 categories of personal insolvency licences which AFSA issue and regulate. The lesser category is a Registered Debt Agreement Administrator and the higher category is a Registered Trustee in Bankruptcy.

What is a Debt Agreement Administrator?

A Registered Debt Agreement Administrator (RDAA) is licenced to set up and supervise Debt Agreements only. A RDAA can be a company or a person. A RDAA cannot offer any other personal insolvency services such as bankruptcy administration and personal insolvency agreements. The reason for this is that the practitioner needs a higher degree of skill and experience to administer bankruptcy administrations and personal insolvency agreements. A RDAA is only required to hold a Certificate IV in Accountancy (which only takes 1 year to obtain at TAFE). Compared to a Registered Trustee in Bankruptcy who is required to hold a bachelor degree in accountancy and also be a member of the Institute of Chartered Accountants or CPA Australia.

What is a Registered Trustee in Bankruptcy?

To become a Registered Trustee in Bankruptcy the requirements are significantly higher (compared to a RDAA). A Registered Trustee in Bankruptcy who is required to hold a bachelor degree in accountancy (which takes a minimum of 3 years at university), be a member of the Institute of Chartered Accountants or CPA Australia (which takes a minimum of 1 year in post graduate studies) and also be a member of the peak professional body in Australia (Insolvency Practitioners Association of Australia which takes another year in post graduate studies). Obtaining all of these qualifications will take a minimum of 5 years.  In addition, to become registered as a Trustee in Bankruptcy, you must be able to demonstrate to AFSA that you have relevant work experience in administering bankrupt estates and personal insolvency agreements. Without all of this you will not obtain registration.
As a result of these more stringent educational and work experience requirements, a Registered Trustee in Bankruptcy will clearly have more skill and experience in handling personal insolvency cases.

A licensed insolvency practitioner is someone who holds the necessary qualifications and is registered with the Australian Financial Security Authority (AFSA) and or the Australian Securities and Investments Commission (ASIC).
To be licensed to offer all personal insolvency services you need to be Registered as a Trustee in Bankruptcy with AFSA. To become a Registered Trustee in Bankruptcy you need to hold a university degree in accountancy and be a member of the Institute of Chartered Accountants or CPA Australia. In addition, it is highly desirable that you also be a member of the Insolvency Practitioners Association of Australia. To obtain all of these qualifications it takes many years of study. It takes a minimum of 5 years to obtain these formal qualifications but it can take much longer to become registered as a Trustee in Bankruptcy. Obtaining the formal qualifications is only the first step. Gaining the necessary work experience will take much longer and AFSA conducts lengthy and thorough interviews before they register applicants. AFSA will test the applicant’s knowledge of the Bankruptcy Act very thoroughly, so unless you have many years of experience in administering personal insolvency cases, it is unlikely you will gain registration.
The benefit of dealing with a fully licensed insolvency practitioner is that they are highly experienced professionals and have completed very demanding studies. The other benefit of dealing with a fully licensed insolvency practitioner is that they can offer all personal insolvency services including:

• Debt Agreements
• Personal Insolvency Agreements
• Bankruptcy

When dealing with a fully licensed insolvency practitioner, you can relax knowing that the practitioner won’t be biased towards a particular product as they can legitimately offer all insolvency services. Some companies advertising their services on the internet don’t have fully qualified insolvency practitioners on staff and will instead charge you for doing some preparatory work and will then refer your case onto another company at a later stage. This of course leads to duplication in costs and unnecessary delays.
Here at Debt Free you don’t have to worry about any of that because our CEO is fully licensed insolvency practitioner with both AFSA and ASIC. We offer all personal insolvency services.
We look forward to assisting you with your personal insolvency issues.  Call our friendly personal debt advisors on 1800 462 767.