By Max Banks

No matter where you live in the world sometimes debt can begin to overtake your life and cause unmanageable stress. There are a variety of solutions which can help relieve some of your stress and get your debt paid off. Debt consolidation, debt agreements and personal insolvency agreements are a few of these solutions.

The basic idea with debt consolidation is to replace your various debts with one large debt and at the same time reduce your payments down to one. One such debt consolidation solution may be to take out an unsecured personal loan. The idea here is to take out a loan in the amount of your total credit card debts, which provides a lower interest rate, one regular payment and a shorter term. The proceeds from the loan are used to pay out your creditors. With a loan such as this, you can usually make payments weekly, fortnightly or monthly. The length of the loan will be determined on your payment needs and can range from twelve months to seven years.

Generally, when choosing this option you are already paying a much higher interest rate on your credit cards and the loan may reduce your total overall payment. To be considered for this option, you would need: to have been in your same job for a year, have less than $50,000 in debt, be up to date on your payments and possibly pay an application fee. Also, your credit history needs to be in good standing. Keep in mind these lending rules can change at a moments notice, so what lending criteria is current may not be current tomorrow

Another option may be to sign what is known as a debt agreement. Similar to the above debt consolidation, debt agreements place all of your unsecured debt (credit cards, personal loans, childcare fees etc..) into a single pool of debt. If you qualify for such an agreement (see qualifications below) you make one weekly or fortnightly payment and legally creditors must not contact you and must cease any legal proceedings against you.

What you can’t afford to pay is written off and your interest charges cease.The qualification for such an agreement, which have been decided by the Australian government, are as follows: weekly net pay less than $1,218.52, unsecured debts less than or equal to $84,484.40, and assets less than or equal to $84,484.40, these values change bi-annually. Also, you cannot have a bankruptcy or other debt agreement within the past ten years. When you enter a debt agreement it will appear on your credit history for seven years, your name will appear on the NPII which is a permanent government document, and all included debts in the agreement will be closed.

A third option is what is known as a personal insolvency agreement (PIA). A PIA is essentially a compromise between you and your creditors. PIAs are allowed through the ITSA Commonwealth Agency. With a PIA creditors aren’t allowed to contact you, they can’t enforce any wage garnishments, and interest charges cease. PIAs are essentially debt agreements for people that fall outside of the criteria for a normal debt agreement. You are eligible for a PIA if: you have a weekly net income greater than $1,218.52, unsecured debts exceeding $85,000.00, or assets exceeding $85,000.00. Generally, these agreements are regular repayments over a five year period.

In some rare instances, a sale of assets occurs. Your payment would be determined through an exploration of your financial situation to see how much you can afford to pay. In the later stages of the PIA, a meeting of creditors is held where the creditors will vote on the agreement. You will then make regular payment to a trustee who will disburse the monies to your creditors. Personal insolvency agreements can be a complicated matter and a professional debt consolidator or mediator should be contacted.

Each individual situation will determine which of the above options may be best. A professional debt consolidator or mediator should be consulted before any of the above actions should be undertaken by a person.