The Australian Government introduced legislation to help Australians get out of debt with a formal creditor arrangement. The legislation is contained within Part IX and Part X of the Bankruptcy Act.
The legislation was first introduced in 1966 under Part X of the Bankruptcy Act. As the law stood in 1966 there were three (3) individual arrangements to choose from being:

• deeds of assignment,
• deeds of arrangement; and
• compositions.

These arrangements were unnecessarily complicated and expensive to set-up so the law was streamlined and simplified in 2004. The three (3) arrangements (as listed above) were replaced in 2004 with a more simplified process known as “Personal Insolvency Agreements“.
After introducing the Part X legislation in 1966, the Australian Government realised that the three (3) individual arrangements under Part X of the Bankruptcy Act were expensive and complicated to set up (as they required the services of a fully licenced and registered Trustee in Bankruptcy), so in an effort to make formal creditor arrangements more affordable for lower income earners (with lower debt levels), the Government introduced Part IX of the Bankruptcy Act. The new creditor arrangement for low income earners (with lower debt levels) was legislated in 1996.  The government named these as Debt Agreements.
Choosing which agreement to enter into will depend on your available assets, income and unsecured debt levels as explained below:

 
Click here to learn more about the differences between a Debt Agreement & a Personal Insolvency Agreement.
If you are in need of advice on a formal creditor arrangement to help you get out of debt, then call today and speak to a personal debt consultant on 1800 462 767.

If you are unable to repay your debts on time, a Debt Agreement could be a positive step towards becoming debt free. Unfortunately, there are some downsides and for that reason, you need to carefully review the consequences of entering into a Debt Agreement before proceeding.
So you are presented with a balanced view, we list the advantages and disadvantages of entering into a Debt Agreement.

Advantages:

• Any current or pending legal action to recover your debts will be suspended once your proposal is lodged and accepted for processing by AFSA. If your Debt Agreement is subsequently accepted by creditors, the legal action will be cancelled.
• Secured creditors will not be affected, so you will be able to keep your financed assets (like your car and house) as long as you keep these payments up to date.
• There are less restrictions placed on you (compared to bankruptcy) , so you will be free to travel overseas.
• Your repayments will be based on what you can afford and not based on what your creditors may be demanding. The repayments will be affordable and flexible so you will be able to meet your existing financial commitments (i.e. car leases and house mortgages). You will benefit from one regular repayment, which will cover all creditors and this payment will be matched to your payroll cycle (i.e. if you get paid weekly we will make the repayments weekly).

Disadvantages:

• Your personal details and information will be recorded on the National Personal Insolvency Index. AFSA the government agency who manages the NPII database shares that information with the credit reporting agencies.
• The fact that you have entered into a formal arrangement with your creditors will be recorded on commercial credit reporting databases for a minimum of 5 years (unless if the agreement runs longer than 5 years) (this time period will run from the time that you enter into such an arrangement). After a minimum of 5 years (unless if the agreement runs longer than 5 years),  the listing will be removed from your credit file and will not show up any searches (unless people search the NPII directly which is a separate government database). The most common question people ask is:

“Can I get a loan after my debt agreement is completed?”

Given most Debt Agreements run for between 3 to 5 years there will be a short period of time after your agreement where it may be a little more difficult than usual to get credit. Many clients we have helped have been able to get new credit after successfully completing their debt agreement but unfortunately it will be up the financial institution at the time to assess your application.
If you are having a hard time managing your unsecured debt and you are in true need, the advantages of a Debt Agreement may outweigh the disadvantages.  The most important thing is that you have been made aware of the disadvantages and you have carefully considered these consequences.
If you are thinking about a Debt Agreement, call us today and speak to our friendly but very professional debt consultants. Call now on our toll free advice line 1800 462 767

How do I escape the cycle of credit card debt and become debt free

Credit card debt can become financially crippling if you only pay the minimum amount due each month and continue to incur more debt. Australians are paying record high interest rates as the large commercial banks have largely failed to pass on the interest savings following the cuts from the Reserve Bank in 2012 and 2013.
The average interest rate for credit cards currently stands at approximately 17% (according to RateCity as at May 2013 and data published by the Australian Securities and Investments Commission estimates that the average credit card debt (per card holder) is currently $4,700 and that debt attracts interest of approximately $807 per annum. It is alarming to learn that if you have a credit card debt of $2,500 and only pay the minimum balance each month, it will take 15 years to repay the debt. (source)
If you feel trapped by credit card debt and want to escape the cycle of debt, read below to learn how you might consider going about this.

Consolidate your credit cards

Consolidating your existing credit cards is a great way to reduce the interest bill if you can find a loan which attracts a lower rate of interest. If you have a good credit history and have a stable income you should be able to find a personal loan which attracts less interest than a credit card.  If successful you will be able to roll all of your credit card debt into a personal loan (these are marketed as debt consolidation loans). If you own a house you may be able to redraw funds from your mortgage facility to pay off your credit cards. Most mortgages attract a lower rate of interest compared to credit cards.
For people with a poor credit history, it can often be far more difficult to get a debt consolidation loan or to refinance credit card debt. People with a poor credit history may wish to consider a formal debt solution.

Negotiate an informal arrangement

If you have multiple credit cards, it can become difficult to manage the repayments with different credit card companies. You may try and negotiate an informal arrangement.
The only downsides with an informal arrangement are twofold:

1. You can’t force any one creditor to accept your repayment proposal; and
2. It is unlikely the credit card companies will reduce or freeze the interest (for any longer than say 3 months under a hardship arrangement), so your debts can spiral out of control if the situation isn’t managed carefully.

Consider a formal arrangement

If you have tried an informal arrangement and it failed or you simply can’t afford to repay your debts, you may wish to consider a formal arrangement with your creditors.
A formal arrangement with your creditors like a Debt Agreement or a Personal Insolvency Agreement will have the benefit of freezing the interest on the credit cards and will allow you to make one regular payment towards all credit cards and any other debt you may have. With a formal arrangement you can also select the frequency of your payments to match your payroll cycle (like weekly, fortnightly or monthly).
Click here to learn more about entering into a formal arrangement with your creditors.

If you are facing bankruptcy it may be tempting for some to try and shift assets to keep them away from your creditors.
The Bankruptcy Act has very strict rules to protect creditors from people who shift assets prior to bankruptcy.  We will explore the most common type of transactions which may be clawed back under bankruptcy.

Bankruptcy and Superannuation Contributions

If a person who later becomes bankrupt, transferred an excessive amount of money prior to bankruptcy into their superannuation fund, this amount in certain circumstances, can be clawed back.
By way of an example if someone transferred $10,000 into their superannuation fund, immediately prior to bankruptcy, the Trustee in Bankruptcy could at a later stage “claw” this amount back.
If however, your employer simply paid the regular instalment from your salary into your superannuation fund, then these payments would not become challenged or attacked by a Trustee in Bankruptcy.

Bankruptcy and the Family Home

Where a person transfers their share in the family home to their spouse within 5 years of becoming bankrupt and the consideration paid is less than market value, the transaction can in many circumstances be clawed back. The most common example is where the property is transferred for “love and affection” or for a “nominal amount” like $1.
The “claw back” period can be indefinite if the Trustee in Bankruptcy can prove that the transfer was done to defeat creditors. For example, if someone transferred property for no consideration 10 years prior to becoming bankrupt to avoid and defeat creditors, then the Trustee in Bankruptcy would be entitled to claw it back.
If you are considering bankruptcy, do not shift assets out of the reach of your creditors.  Shifting assets prior to bankruptcy can be traced and clawed back.  If you get caught out your bankruptcy will get extended from the minimum period of 3 years to the maximum period of 8 years.

What is an informal repayment plan?

An informal repayment plan is an agreement between you and your creditors to repay debt (usually over an agreed period of time).  Negotiating a repayment plan is most suitable for people who only have a small number of creditors. If you have more than say three (3) creditors negotiating an informal repayment plan can become more difficult to set up as different creditors may want different things.

Start with preparing a budget

Before you can starting negotiating with your creditors you need to prepare a budget so you know precisely how much money you have available to offer your creditors each week or month.  Budgets are easier to prepare and manage if you match them to your payroll cycle.  So if you get paid weekly then prepare your budget on a weekly basis.  Start the budget by writing down your essential expenses like:

• Clothing;
• Food;
• Insurances;
• Housing (rent/mortgage);
• Medical;
• Transport; and
• Utilities (like electricity, council rates, telephone, water etc).

Once you have covered your essential items you can then make a start on non-essential items like:

• Entertainment (eating out etc)
• Gifts
• Holidays

When preparing a budget for the purposes of offering your creditors a repayment plan, you should of course keep the non-essential items to a minimum.

So after deducting the expenses from your income you will hopefully have a surplus that you can use to offer your creditors.

What should I offer my creditors?

Once you have established your weekly or monthly surplus, you will have to allocate that surplus amongst your creditors (ie this surplus will become your fund to make repayments). We recommend that you share this surplus on a proportional basis so it is distributed fairly amongst your creditors. This way one creditor can’t argue that the other creditor received preferential treatment, or vice versa.

Start by offering a little less than what you have budgeted so you allow yourself a buffer for any unexpected expenses which may pop up from time to time.

When you start negotiating your repayment plan, remember to keep the following points in mind:

• Your creditors have no legal obligation to accept your offer even if they initially agree to it. They are entitled to change their mind at some later stage, particularly if you start missing or are late with the agreed payments; and
• You may not be able to get all creditors on board with your plan. Some creditors will insist that you pay them what they want as opposed to what you can afford.

What are my other options if I can’t get them all to agree?

If you can’t get all creditors to agree to your plan you have a few options:

1. Pay whatever you can afford to the creditor who didn’t agree and monitor their actions very closely. If they commence debt recovery action, you may wish to consider other options like a formal arrangement with all creditors;
2. Consider a formal arrangement which will bind all creditors. With a formal arrangement (either a Debt Agreement or a Personal Insolvency Agreement) it will bind all creditors if the majority of them agree to it. So if the creditor who didn’t agree to your proposal only holds a small percentage of your total debt (and the other creditors agree) the agreement will become legally binding on all creditors.

If you need help or advice with an informal arrangement or a formal arrangement with your creditors call us today on our toll free advice line 1800 462 767.

Take a few moments to review our checklist to see if you are experiencing debt stress.

• Are you experiencing cash flow problems and having difficulty with repaying your credit card or personal loan debt?
• Are you getting further into arrears with your credit cards or personal loan repayments?
• Have you attempted to consolidate (or refinance) your credit card debt or personal loan debt into your home loan but you were turned down?
• Do you feel you now need professional help to get your debts under control?

If you answered yes to one or more of these questions, then you should at the very least consider getting a professional to review your finances.  Here at Debt Free Australia we have developed a rigorous debt assessment system which will thoroughly review your finances to tell you whether you can repay your debts yourself over time (without any formal debt solution) or whether you would be best placed to propose a formal arrangement with your creditors.

We offer this debt assessment free of charge and without obligation.

It is also our commitment to provide all of our callers with the best impartial advice available. The possible outcomes we may recommend following a debt assessment could be:

• Continue to manage your debts yourself through an informal arrangement
• Propose a debt settlement with your creditors through a Debt Agreement
• Propose a debt settlement with your creditors through a Personal Insolvency Agreement.
• Declare bankruptcy.

We are able to assist with all of the above options, so we are not biased towards only offering one solution to our callers.

If you are concerned about your debts, don’t delay call us today to arrange an obligation free debt assessment.

Call us now our toll free advice line 1800 462 767.

If you have a credit card debt problem, you are not alone. Many Australian’s  struggle with credit card debt payments every day. Dealing with debt can be incredibly worrying and frustrating, especially if you have high levels of credit card debt which attracts a high rate of interest. However, it is possible to find a solution for your credit card debt and get on with your life.
We recommend that you try our five (5) tips below before you consider any formal debt solution.

1.            Make Your Credit Card Repayments on Time

Firstly, it is very important to make your repayments on time. If you constantly pay your repayments late, you will just get yourself into further debt with later payment penalties and additional interest. If you have trouble remembering the due dates, write it down on a calendar. Paying your credit cards late will result in defaults being recorded against your credit file which will impede you from getting more credit in the future.

2.            Budget Your Money

If you want to manage your credit card debt, you have to budget your money. Make a budget (either a weekly, fortnightly or monthly budget to match your payroll cycle) and stick with it. Don’t be afraid to cut out unnecessary or luxury expenses to meet your set budget. For example, you could save money by downgrading your internet package or pay TV package and eat in rather than eating out until you get your credit card debt under control.

3.            Take advantage of  Zero Interest Credit Cards (account transfers)

Credit Card companies often promote a zero interest credit card for three (3) to six (6) months if you transfer your balance. If you can achieve this, you will save lot of money in interest for the promotional period. But remember, do not spend money on the old credit card – cut it up so you avoid the temptation of getting further into more debt!

4.            Replace your Credit Card with a  Debit Card

If you have credit card debt, you should replace it with a debit card.  With a debit card you can only spend money that you transfer onto your card.  That way you are not spending money which you don’t have! Again, if you get a debit card, do not spend money on the old credit card – cut it up so you avoid the temptation of getting further into more debt!

5.            Pay a little extra each week against your credit card

Try and pay a little extra each week or month over and above the required minimum payment.  Did you know that if you only pay the required minimum payment, it will take many years to pay off the credit card?  Credit card statements now show the time period it will take to pay off the debt if you only make the minimum payment.  Check out your statement next time you receive it – you will most likely be shocked!
If you follow these simple tips, you should soon get back in control of your  credit card debt.
If you feel you are not getting your credit card debt under control,  you may wish to consider  professional help. We offer free expert advice  to all Australians.  Call us today if you want to know how you can reduce your credit card debts.  Call now on our toll free line 1800 462 767.
 

Personal bankruptcy is what occurs when a person of normal means becomes overwhelmed with debt which they are unable to repay. One should always know what impact personal bankruptcy will have before filing for bankruptcy. Unfortunately, many myths and stories exist around bankruptcy that often scare or worry people unnecessarily.

Bankruptcy Myth #1: all of my personal assets will all be lost 

This is not always true.
Some of your assets are protected under bankruptcy, such as a motor vehicle that is estimated to be worth less than $8,550 . Any items that you may use to make a living (also known as ‘Tools of Trade’) that are worth less than $3,950. Your retirement fund (also known as your superannuation).

Bankruptcy Myth #2: all of my income will be lost or restricted when I file for bankruptcy

This is not always true.
Your income will be assessed every year for compulsory income contributions. If your assessed income exceeds the set limits, you will be required to financially contribute money toward the bankruptcy. The limits are revised every six months, however, it is important to understand that if you exceed the set limits you will not lose your income, but you will be required to make a financial contribution towards your bankruptcy.The payments are 50% of the amount which exceeds the set limits.

Bankruptcy Myth #3: everyone will know I filed for bankruptcy

This is not always the case.
It is true that a record of your bankruptcy is maintained on a public database known as the NPII, but for one to access this information they must pay a search fee to the registry. Given it is not a free search it is not usual practice to search this database. Your bankruptcy will not be published anywhere publicly.
Your bankruptcy status will however appear on your credit file for a period of 7 years.

Bankruptcy Myth #4: I will never get out of bankruptcy  

False: Bankruptcy only lasts a number of years.
In Australia, the usual time period is 3 years, however, bankruptcy can be extended in certain circumstances. The extension can be to up to either 5 or 8 years.

Does Bankruptcy seem so bad?

Sure, there are certain restrictions placed upon you (most of which will only last for 3 years), but many of the myths that cause people to worry so much about bankruptcy are just that, myths. Don’t let secrets and whispers scare you away from what is often an effective method to solve serious debt problems.
If you need to speak to a debt advisor, we offer a free advice line. Call Today on 1800 462 767

 Making the decision to declare bankruptcy is not easy and should not be rushed. Whilst bankruptcy might wipe out all of your unsecured debt, but there are severe consequences that need to be carefully explored. Before you decide to file for bankruptcy, we recommend that you carefully weigh up your options and seek professional advice.
Here are the four steps you need to take before you declare bankruptcy.

1. Have you carefully assessed your options?

It is important to consider all of your options before you decide to file for bankruptcy. The decision to file for Bankruptcy should not be taken lightly and should be your last resort. You should firstly check if you can make payment arrangements with your creditors first (either informally or formally through a Debt Agreement or a Personal Insolvency Agreement. If you genuinely cannot pay off your debt and you don’t have assets which would be sold in bankruptcy, then voluntary bankruptcy may be the best option for you.

2. Are you eligible?

You must assess the criteria of bankruptcy.  Firstly you must be insolvent and you must be present in Australia at the time you file for bankruptcy. AFSA (the government agency) who considers bankruptcy applications will firstly assess if you are insolvent.  When conducting this review AFSA will assess if you are able to repay your debts in full within a reasonable period of time. Secondly, AFSA will review the address you have provided on the bankruptcy application.  For it to be accepted you must have an Australian address. So if you are an Australian resident but living overseas, you would need to return to Australia to file your bankruptcy application.

3. Get expert advice 

Before you decide to declare yourself bankrupt, you should get expert advice. A registered bankruptcy trustee will know all about traps and pitfalls of bankruptcy.  Bankruptcy can be complicated so you should only trust a fully qualified expert. When you speak to the expert, make sure that you truthfully disclose your full circumstances.  Hiding assets or not truthfully disclosing your details could result in your bankruptcy being extended to up to 8 years (from the usual period of 3 years). If you disclose all of your finances truthfully and honestly, our expert will be able to find the best debt solution for you.
To get free advice one of our experts, you can take advantage of our Toll Free advice line on 1800 462 767

4. Complete & lodge the bankruptcy forms 

The last step will be to complete and lodge the bankruptcy forms with AFSA. To file for bankruptcy, you will need to fill out a debtor’s petition, a statement of affairs and prescribed information. Make sure to take your time when filling out these forms so that everything is correct. If you are ever unsure about how to complete these forms, you should contact a professional bankruptcy trustee for assistance.
The process of filing for bankruptcy can definitely be stressful so we can take away that stress for a once off fee of $600.  Our fee covers a thorough assessment to explore if you are eligible to avoid bankruptcy. Most of our clients feel a great weight has been lifted from their shoulders once the bankruptcy application has been processed and accepted by AFSA.

Debt reduction services usually take the form of an informal or formal arrangement with your creditors. To understand the differences between informal or formal arrangements with creditors click here or read below.

Informal Arrangements

If you have multiple creditors and are struggling to keep up with all of the repayments you may wish to consider an informal arrangement with your creditors. Click here to learn how you can negotiate an informal arrangement with your creditors.

Formal Arrangements

If you have been struggling with unsecured debt for some time then a formal arrangement with your creditors may be more appropriate.
There are different types of formal arrangements and the appropriate one for you will depend on your circumstances.  The relevant factors which need to be considered are:

• Your unsecured debt levels;
• Your income after tax; and
• Your assets.

If you elect for a formal arrangement, we strongly advise that you carefully select the service provider. Here at Debt Free, we are:

• Fully licensed to handle all types of formal creditor arrangements including Debt Agreements, Personal Insolvency Agreements and Bankruptcy.
• Fully insured (we have professional indemnity whereas many other debt agencies are not insured at all as it is not a legal requirement).
• Privately owned and operated by a Chartered Accountant who is also a member of the peak professional insolvency body in Australia Insolvency Practitioners’ Association of Australia.

If you need advice on debt reduction services call us today on 1800 462 767.