Insolvency is on the rise in Australia and many people are being forced to learn how to deal with being insolvent. We are here to help you understand what insolvency is and what you can do to beat personal insolvency today.
What Is Personal Insolvency?
What does personal insolvency involve and what do you need to know
Insolvency is being unable to pay back the money you owe to your creditors. This can come in two main forms which can have very different impacts. The first type is cash flow insolvency, which is where you have enough money across all your assets to pay back your debts, but do not have enough in liquid assets to pay off your debt. For example, you might own a house and car but not have enough money in liquid form to pay off your debts. This can usually mean negotiations with your creditors in order to get more time to pay off your debts.
The second type is balance sheet insolvency. This is where you don’t have enough money across all your assets to pay off your debts. When you are balance sheet insolvent it can be harder to negotiate with your creditors and you may be forced to enter into bankruptcy or a debt agreement which are ways that insolvency is resolved.
To find out your level of insolvency you can talk to a debt counsellor who can assess your finances and find possible solutions to get you out of insolvency as soon as possible. When you are insolvent, you are unable to meet the required payments of your debts. It can be a criminal offence for businesses to continue operating while insolvent and whilst the same doesn’t apply to personal insolvency it is important that you seek advice and help to get out of insolvency as soon as possible as debts will start to mount and that is when debt collectors start to circle.
If you are considered insolvent, you need to talk to a debt counsellor as soon as possible as your creditors, knowing you are unable to pay on time, can force you into declaring bankruptcy which might not be an option you want to take. Once you become unable to pay off your debts either on time or in full call Get Out Of Debt Today on (02) 9011 7919 and start on our tailored budgeting system today to save yourself from bankruptcy.
Insolvency’s On The Rise In Australia
Personal insolvency is on the rise in Australia | There are ways you can get help
Insolvency is on the rise again in Australia for the first time since the Global Financial Crisis. A report by the Australian Financial Security Authority showed that insolvencies had risen 4.4% this year. This had also lead to an increase in bankruptcy’s and debt agreements across the country. It is clear that now more than ever, people need options to consider when they think they have or could go insolvent.
Many Australians are being forced into bankruptcy by their creditors who are looking to recoup as much of what they lent in the first place. This can have a serious effect on your ability to borrow in the future as well as on job prospects if you have been forced into bankruptcy. Many people are unaware that there are alternatives to bankruptcy or they act too late on their debts to be able to negotiate properly and in good faith with their creditors.
Get Out Of Debt Today can offer alternatives to people considering bankruptcy, debt agreements or personal insolvency agreements. We work with you and your creditors to reduce the amount of debt you owe through careful negotiations and budgeting. With the rise of insolvency across Australia, it’s important to remember that there are solutions to insolvency that don’t have to affect your credit rating if you address them as soon as possible. Talk to Get Out Of Debt Today to avoid defaults and black marks against your credit rating.
What Is A Personal Insolvency Agreement?
How can you use a personal insolvency agreement to get out of debt
A personal insolvency agreement is a formal option for a debtor to pay of his or her debts when they have become unmanageable. It is a way for the debtor their creditors can come to an agreement without the debtor having to declare bankruptcy. Similar to a debt agreement the debtor offers a legally binding arrangement that the creditors must agree upon. It will usually involve one of the following which could involve the full amount or part of the amount of debt being paid:
A lump sum payment from the debtors own money or from a third party such as friends or family.
A transfer of assets such as a house or car to the creditor or payment after the sale of those assets.
Or a payment arrangement with the creditors such as smaller monthly payments or a payment deferral.
Unlike a debt agreement, a personal insolvency agreement has no limits on debts, assets and income limits, meaning that anyone is able to enter a personal insolvency agreement to their creditors.
To enter into a personal insolvency agreement in Australia you need to be insolvent and be an Australian citizen or have a business in Australia. It is a legal alternative to bankruptcy by is still considered to be an act of bankruptcy. Usually you agree to pay a certain amount to your creditors over a period of years usually between 2 – 5 years in total. Some areas it is different to bankruptcy is that you are still able to travel overseas and you are not required to have a yearly assessment of your income as you would have if you declared bankruptcy.
Get Out Of Debt Today is able to handle your personal insolvency agreement if that is the path you choose to go down. We take care of everything for you and ensure you get a good deal from your creditors and work hard to ensure that they agree to the agreement. Most creditors are looking to secures between 60% to 80% of what they lent. Call us today for more information on personal insolvency agreements and other options available to get you out of debt.
How Does A Personal Insolvency Agreement Work?
What happens to you and your assets when you enter a personal insolvency agreement
First a debtor must appoint a controlling trustee to take control of your property and offer up the insolvency arrangement. The trustee then investigates your finances to come up with a proposal which shows the creditors what they can expect through the insolvency agreement and what they can expect through you declaring bankrupt making recommendations over whether it is worth you declaring bankrupt. The creditors are then able to ask questions about your finances and see your financial records. You will then have a meeting where the majority of the creditors must agree to the proposal.
Once you have appointed a controlling trustee, they have complete control over your property and you are unable to deal with your property without consent from the trustee. You are unable to change your mind as well as appointing a controlling trustee is a legal agreement. This controlling trustee period lasts until the insolvency agreement is agreed upon by your creditors, you are released by the courts, after a period of four months or if you declare bankruptcy.
If it is agreed to then the agreement comes into effect and is legally binding to all involved. A trustee will then oversea the agreement to make sure that funds are split evenly between your creditors and make sure that the agreement is upheld. If it is not agreed to then your creditors are able force you into bankruptcy or leave it to you to decide how to pay off the debt.
A personal insolvency agreement is different to bankruptcy in that is much more flexible. It is you agreeing to pay a certain amount over a period of time. It is similar to a debt agreement or an informal agreement which are other alternatives. It is legally binding and once you have paid off the amount your creditors are unable to seek reimbursement for any debt that may not have been part of the agreement. You are also only allowed to put your unsecured debts into your personal insolvency agreement, but secured debts such as home loans are not. A debt counsellor can talk you through all of the information you need to know and what affects it will have on your finances in the short and long term.
What Are The Consequences Of Entering A Personal Insolvency Agreement?
What are some of the major pitfalls of entering a personal insolvency agreement?
Similar to a debt agreement and bankruptcy, there are consequences to you entering into a personal insolvency agreement which need to be carefully considered.
As an act of bankruptcy, your creditors will be able to force you into bankruptcy if they don’t accept your deal. This cannot happen until after the meeting between yourself, your administrator and the creditors.
You are automatically unable to manage a corporation until after the personal insolvency agreement.
You are unable to deal in your property without consent of your administrator.
Will appear on your credit record for five years and in some cases longer.
It is also recorded in the National Personal Insolvency Index forever.
You must provide all financial information to your trustee and assist them in any way they ask.
There are also a number of fee that need to be considered such as paying the trustee and entering the agreement with the government, which incurs a fee.
Your creditors are unable to chase you up for any other debt once the terms of the agreement have been met.
As a legally binding agreement, both yourself and your creditors are unable to break the agreement unless the terms are not met or through the courts.
There are both positive and negative agreements for entering into a personal insolvency agreement. You have more control over how you pay back the debt but are at the mercy of the trustee as to how much and whether the amount offered is acceptable. The trustee is independent and can advise your creditors that they are likely to get more money if the force you into bankruptcy.
Talk to a debt counsellor before appointing a trustee, as they can advise you on whether a personal insolvency agreement will be agreed by your creditors or can potentially offer up alternatives to entering a personal insolvency agreement. Make sure you have all the facts before taking such a big step into insolvency reduction.
Is A Personal Insolvency Agreement Right For Me?
There are other ways to deal with personal insolvency that don’t ruin your credit rating
Only you can know whether you want to enter a personal insolvency agreement and whether it is the right move for you to make. We recommend exploring all options analyzing the positives and the negatives so that you can come to the right decision.
Remember that when you are trying to get out of debt there are no easy options. A personal insolvency agreement is legally binding and as such you must make repayments on time. This will require proper budgeting and saving to pay off the debt in the time outlined by the agreement.
Talk to Get Out Of Debt Today about starting a budget plan and getting your personal insolvency agreement underway. You can also discuss other potential ways of getting out of debt with one of our analysts in a free consultation call.
You don’t have to affect your credit rating in order to get out of debt, there are other way. Get Out Of Debt Today offers debt counseling services, combing budgeting, negotiation and our knowledge of debt law to help you get out of debt without it affecting your credit rating. That’s no black marks or defaults against your credit rating or on the National Personal Insolvency Index. Call us today on (02) 9011 7919 or fill out our handy form and we can contact you at an acceptable time.