What are my options when I am in debt? Is there any non-Bankruptcy Option?
You may have unmanageable debt and need help to work out what to do. The first thing that comes to mind is that you may need to go bankrupt, however, there are other following options available to you under the Bankruptcy Act 1966:-
This option provides you with temporary relief from being pursued by creditors while you seek help and decide how to proceed. For example, the lodging of your DOI does not automatically make you bankrupt. After 21 days, if you decide to not enter bankruptcy, creditors can continue to pursue you for the debts.
On the flip side, it doesn’t stop a creditor from repossessing goods if you can’t make repayments for a secured debt. A creditor can also use the fact you have lodged a DOI to apply to the court to make you bankrupt.
A debt agreement, also known as a Part IX (9), is a legally binding-agreement you can reach with your creditors if you can no longer afford to repay the debts.A debt agreement can be a flexible way to come to an arrangement to settle debts without becoming bankrupt.
Further, a Debt Agreement usually lasts around three to five years and you agree to pay a percentage of your combined unsecured debt via your Debt Administrator.
Although a Debt Agreement is an act of bankruptcy you can, however, keep your assets, you are able to travel and you can continue to be a Company Director. However, be aware that there are limits to the amount of debt and income you can have to be eligible.
A Personal Insolvency Agreement (PIA) is suitable if you have exhausted all other avenues of debt solutions, are not eligible for a Debt Agreement and don’t wish to file for Bankruptcy. This means your debts, income or assets are above the threshold limits set for Debt Agreements. In other words:
- Your unsecured debts are greater than $116,662
- Your income is greater than $87,496.50
- Your assets are greater than $233,324
Figures have been taken from the Australian Financial and Security Authority (AFSA, January 2020)
PIAs don’t have any upper limits on income earned or debt levels.
To be eligible for a Personal Insolvency Agreement, you must meet the following criteria:
- You are considered insolvent. In other words, you cannot pay your debts on their due dates
- You are living in Australia, are present in Australia or have a business/residential connection with Australia
- Haven’t proposed a PIA in the last six months.
PA personal insolvency agreement involves:
- The appointment of a Trustee to take control of your property and make an offer to your creditors.
- The offer may be to pay part or all of your debts by instalments or a lump sum.
Although the above insolvency options are less severe than Bankruptcy, they may still have a serious impact on you. It may affect your employment, ability to get credit, so before considering any course of action you should talk to one of the trained and experienced advisers on the help you can get regarding your debt.