If your client is experiencing financial distress, you are probably looking at some debt solutions that can help get them back on track with their finances. Here are three of your options.
Debt Agreement
A debt agreement is a formal agreement established between an individual and their creditors. In a debt agreement, creditors agree to accept a certain amount of money over a period of time to settle debts. Once the debt agreement is finalised, creditors cannot attempt to recover the rest of the debts owed.
The debt agreement administrator will prepare a proposal which will lay out what your client can afford to pay. This proposal is sent to their creditors who can then choose to accept or reject it. It is important to nominate a realistic amount that your client can afford, while still keeping their creditors satisfied.
Whilst a debt agreement may seem like a great option, it is important to note that debt agreements will not extinguish your client from every single debt owed. Some debts that are not covered by this debt solution include child support, debts incurred by fraud or any court-ordered payments.
Personal Insolvency Agreement
A personal insolvency agreement (PIA) is similar to a debt agreement. A PIA is a formal agreement in which a majority of your client’s creditors agree to the proposition put forward to repay debts either in full or in instalments.
In order to propose a PIA, your client must be insolvent, be present in Australia or have an Australian connection, or have not offered a PIA in the previous 6 months.
Bankruptcy is the debt solution that people must consider as a last resort due to the serious implications that will entail should your client file for bankruptcy.
Some serious consequences of bankruptcy include not being able to travel overseas without permission and your client’s name permanently remaining on the National Personal Insolvency Index. Their future ability to obtain credit will be affected and they may not be released from all debts.
Which solution is best for your client?
If you would like to discuss the available options for your client, then contact DFA to speak to one of our friendly and professional consultants who will use their experience and knowledge to recommend viable debt solutions. Call 1800 676 598 now.