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 676 598 for impartial and obligation-free debt advice.