Personal Insolvency Agreements are increasingly providing an effective form of debt relief for everyday Australians. They provide hope for the nearly 30,000 individuals across the nation who, according to statistics released by the Australian Financial Security Authority, report being personally insolvent on an annual basis.

Rajesh Narad, a mortgage broker with Loan Market, entered into a Personal Insolvency Agreement in June last year to avoid bankruptcy. Despite owing more than $1.3 million to his creditors, MrNarad was able to negotiate a settlement amount of $100,000 – equating to less than 10 cents in the dollar.

As can be seen by MrNarad’s case, Personal Insolvency Agreements can be a viable option for those who are struggling to repay their debts in full but able to pay a percentage. Many people immediately think of filing for bankruptcy when they find themselves unable to pay back their debts, but there are less serious debt solutions available to them.

A Personal Insolvency Agreement is a legal alternative to bankruptcy that has less harsh consequences for the individual’s financial future and allows for much more flexibility.

It is an arrangement that debtors can negotiate with their creditors when they are no longer able to repay their debts in full. The agreement allows debtors to pay back an agreed amount over a period of time (usually ranging from three to five years). Most Personal Insolvency Agreements allow the debtor to settle their debts for less than what was originally owed, and when the agreement has been completed any remaining balance will be legally written off – as it was in MrNarad’s situation.

However, there are consequences to entering into a Personal Insolvency Agreement. For one, it will be listed on individuals’ credit file for five years. There will also be a permanent record of the debtor going into a Personal Insolvency Agreement on the National Personal Insolvency Index.

“Debtors may have concerns about setting up a Personal Insolvency Agreement, such as the effect on their credit rating and it being on a public record”, says Anthony Warner, Senior Partner of personal insolvency firm Debt Free Australia. “But it is an ideal option for many and offers a brighter future for insolvent Australians.”

Debt Free Australia has a fully licensed Registered Trustee on site who can help debtors to negotiate a Personal Insolvency Agreement with their creditors.

For further information on Personal Insolvency Agreements, or for interview opportunities with Anthony Warner, do not hesitate to contact (02) 8021 3189 or samantha@tmaconsolidated.com.au.