Those who are struggling with debt often have fears of bankruptcy because of the negative repercussions. This can include social stigma or the loss of assets. Many people are unaware that there are alternatives to bankruptcy that might stop debt from spiralling out of control before it reaches that point. Before considering bankruptcy as an option, it is essential to research all your options. Sometimes all it takes is a free consultation with Debt Fix so you can make the best decision for your circumstance.
Some options include asking for more time to pay, negotiating a flexible payment arrangement, or offering a smaller payment to settle the debt. However, sometimes these debts become overwhelming. This blog post will explore some of the options you have and how Debt Fix can help.
What is bankruptcy?
Bankruptcy is the formal process of declaring that you are unable to pay your debts. When you declare bankruptcy, you will not have to pay most of the debts that you owe and debt collectors will stop chasing up payments. However, declaring bankruptcy may also impact your likelihood of borrowing money in the future.
What are the consequences of bankruptcy?
- You will stay bankrupt for a period of three years
- Your bankruptcy will appear on your credit report for a period of five years
- Your name will be included on the National Personal Insolvency Index
- Your affairs will be managed by a trustee
- If you want to travel abroad, you must first obtain permission from your trustee
- You will not be able to be a director of a company without the permission of a court
- You may be unable to work in certain occupations or trades
How do you choose who to trust when it comes to bankruptcy?
It is key that the person you choose knows all of the options available to you. This might mean financial advice, loans and other finance options, managed plans, and bankruptcy. When you feel like you are in a vulnerable position, it can often feel like you only have few debt reliefs options. This narrow view often feels quite disheartening and can make you lose hope.
Some financial advisors will recommend bankruptcy, but it is important to research all your available options. By being well informed, you will be able to make the best choice for your future.
Is debt consolidation a bankruptcy alternative?
Debt consolidation is considered an informal arrangement and can be a way to make your debts easier to manage and eventually pay off. Debt consolidation allows you to take out a new loan to repay your debts. This can mean you’re able to claim a lower interest rate, which can reduce the total amount you’ll pay in the long run. This can also significantly simplify your monthly repayments. Rather than paying several creditors, you only need to pay one payment. If you think that debt consolidation is for you, it may be worth speaking to a Debt Fix expert so a tailored plan can be made for you.
How is a debt agreement an alternative to bankruptcy?
A Part IX debt agreement may be a viable alternative to bankruptcy, particularly if you have a low income. This is because it is a legally enforceable agreement between a debtor and the creditors who owe the money. Debt Fix can help you by creating a realistic budget and money plan for your situation. The benefit of having someone on your side is that we can communicate with your creditors and help you draft up a debt agreement proposal. You can rest assured that the debt agreement will be sustainable and affordable, which affects all parties involved.
How does a debt agreement work?
Your creditors agree to a payment that you can afford under the terms of a debt agreement. To pay off your debts, you are required to pay this amount over a certain timeframe. Once you have paid the full amount, you have paid off all the debts. A debt agreement differs from a debt consolidation loan or unofficial payment agreement with your creditors.
Debt agreements can be a better option in many circumstances, especially because bankruptcy can leave a financial legacy that can last for years.
Ultimately, if you are struggling with debt, there are always options for you. Some solutions will be better than others based on your circumstances, so you must seek out an expert and reliable advice. Ultimately, a trusted financial advisor will be able to honestly manage your expectations while being sympathetic to your situation.
For more advice you can check out our hints and tips page, however, we recommend a free 30-minute consultation, so you understand all the options available to you.
At Debt Fix, we help Australians begin their journey towards debt freedom. We are a Government Registered qualified debt Agreement Administrator and Finance Broker, and we exist to help everyday Aussies navigate their debt. Contact us today for more information on how you can take your first step out of debt.