Fact Sheet - Debt Choices

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Debt Options		Benefits	Consequences
Budget ↓	Construct an affordable, sustainable budget	Take control of finances Improve your ability to repay debts *Have a savings plan	Must be honest and reasonable Requires discipline
Debt moratorium ↓	Client requests a respite	*Opportunity to regain control of finances	* No legal protection * Limited duration *Not a long term solution
Informal Agreement (in writing)/ Payment plan ↓	Client calls creditors and makes an arrangement to clear the debt	Take control of finances Builds relationships with creditors	Must be affordable Requires discipline *No legal protection
Renegotiate loan (UCCC hardship provisions) ↓	The UCCC provides the client the right to re-write the loan under certain conditions	Settlement of debts Convenience of one repayment plan & should be more affordable *Does not affect the credit rating/legal protection	Must be affordable May not be available depending on the debt levels *May incur further Debt or higher interest
Help from family/friends ↓	Personal loans etc	Full/Partial Settlement of debts Does not affect the credit rating *Little or no interest	Relationships breakdown No guarantee until settled
Declaration of Intention to Present a Debtor’s Petition ↓	Stay on legal enforcement action for 7 days ie garnishee	*Allows client time to decide course of action	Act of Bankruptcy Does not solve the issue *One every 12 months
Refinance/consolidation loan ↓	To combine all unsecured debts into one debt	Settlement of debts Convenience of one repayment plan & should be more affordable *Does not affect the credit rating	Eligibility depends on the client’s credit worthiness May not be available depending on the debt levels *May incur further Debt or higher interest
Part IX Debt Agreement ↓	Formal agreement b/w debtors and creditors which is an alternative to Bankruptcy	Released from provable debts Convenience of one low repayment plan & should be more affordable	Act of Bankruptcy Affects credit rating *Income/Assets and Debt limits
Personal Insolvency Agreement (PIA) ↓	Formal agreement b/w debtors and creditors which is an alternative to Bankruptcy	No Income/Assets and Debt thresholds Flexible solution	May be costly to establish (trustee costs) Act of Bankruptcy *Affects credit rating
Bankruptcy	Last resort	*Released from provable debts	Affects credit rating Vesting *May affect employment/travel/inheritance and other future events

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Important: This information sheet is not legal advice and should not be interpreted as such. This sheet is meant for information only. Information regarding the subject matter contained within this fact sheet may vary from state to state, therefore in the event that further information is required, legal advice should be sought. Information is current as at 05/03/2006

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Fact Sheet - Debt Choices