Options to Eliminate or Consolidate Debt
The Australian economy may be healthier now however there are clouds on the economic horizon with the certainty of further interest rate rises and unemployment increases. But this doesn’t mean families or individuals are necessarily doing it easy as personal debt is at record levels.
The personal debt to income ratio in Australia is one of the highest in the world – higher than America and the UK (For every $100 we earn, we owe $130). Credit and charge cards account for $26 billion of the debt.
Australian Bankruptcy statistics for the March quarter indicate that the number of bankruptcies is up on the previous March quarter. Increases were in fact seen in all states with the exception of the ACT.
What Are Debt Agreements
Debt Agreements were introduced into the Australian Bankruptcy Legislation in 1996. They represent a low cost alternative to bankruptcy. People with a low level of income are able to utilise debt agreements as a tool to finalise their outstanding debts without needing to hire and pay for an administrator.
Debt Agreements are legally binding proposals made to your creditors in order to finalise your debts. Creditors are asked to accept a smaller amount of payment to settle the outstanding debt or agree to certain payment terms that are different to those in your original loan agreement. Under these agreements creditors generally receive more of their money than if you declare bankruptcy – hence they have an incentive to meet you half way and agree to your proposal.
To be eligible for a Debt Agreement your total amount of unsecured debts, your income levels and your assets must be within the set levels specified by legislation. To qualify you must also have not declared bankruptcy or signed a Debt Agreement during the previous 10 year period.
Debt Agreements in Australia are regulated by ITSA.
Who is ITSA
ITSA is the Insolvency and Trustee Service Australia. It is the government agency responsible for the administration and regulation of the personal insolvency system in Australia. ITSA manages the bankruptcy registry, where debtors petitions are lodged, debt agreement proposals are processed and public records on insolvency are maintained. ITSA is also the agency which is responsible for providing Australians with information about bankruptcy and it’s alternatives.
What is Bankruptcy
If your debts are mounting up and you are unable to pay them. If you are receiving daily harassing phone-calls from your creditors – the Bankruptcy option may begin to look attractive. However before you make any irreversible decisions in this direction you really do need to understand all the rules and consequences of bankruptcy.
Bankruptcy is legal status offering protection from further action by creditors whose debts are `provable in bankruptcy’. A creditor may also petition for a person’s bankruptcy in court.
Deciding to declare bankruptcy has very serious implications for your credit rating, your ability to borrow money, and places a serious of legal and financial restrictions on the bankrupt.
Before making a decision to declare bankruptcy you most certainly should investigate what other options are available to you. Debt Consolidation Loans may be one such option.
Consolidating debt into a new Home Loan
Debt Consolidation Loans allow the borrower to consolidate their existing unsecured loans into either their mortgage or a low rate personal loan. If you have a number of unpaid credit cards and various bills – meeting the scheduled repayment on these may indeed be challenging. Grouping all these loans into a single personal loan may save you money and make the required repayment more affordable.
If you are a homeowner who is experiencing debt problems, consolidation of your outstanding debts into your mortgage may be the answer. No matter if your bills are from a failed business venture, unpaid credit cards, personal loans and the like, you may be able to use the equity in your home to resolve your financial problems and still keep your home. This is a classic case of “having your cake and keeping it too”.
Debt Consolidation Home Loans for homeowners are available in Australia irrespective of your credit rating and are a great debt resolution tool.
What is Your Best Option to Consolidate Debt?
While your best option will depend on your individual circumstances, in general Debt Consolidation Loans do not do any damage to your existing credit history and therefore if you are able to consolidate your outstanding debts into a single loan, that is always your best option. Where Debt Consolidation Loan is not an option, you may wish to consider a Debt Negotiation with your creditors to lower out the payouts.
While a signed Debt Agreement is reflected on your credit history it is a better option than Bankruptcy. Declaring Bankruptcy should always be seen as your last option and only explored when all other alternatives have been considered.