Bankruptcy in Australia - Choices, Choice, Choices

When it comes to Bankruptcy Australia, there are a bunch of options that we get given depending on who we are, who we approach, and just what has happened. One of the most common confusion I see with Bankruptcy is when it comes to selecting between Debt Consolidation, Personal Insolvency Agreements, and Bankruptcy itself.

Should I consolidate my debts?

When it comes to Bankruptcy in Australia, most of the info you receive on this issue will reflect the interests of the advice giver. Therefore, if you call a debt consolidation provider, I can assure you they will tell you to consolidate your debts. The debt consolidation business is a multi-billion dollar industry making money in one very simple way: charging you a fee for assisting you wrap all of your credit card and personal loans into just one neat and tidy package.

I hate to tell you this but they aren't doing it for free. Please do not misunderstand me: if you think your financial troubles in Australia might be solved by paying less interest, then go ahead and consider the choices. Even a little amount of interest saved over years quickly adds up.

Normally I find if you are reading this blog you've probably attempted to consolidate your debts already and come to the following realisations such as these:

• Your credit rating is not good, and your credit file already has nonpayments on it so not a single person will give you a loan, consolidated or otherwise,.

• By the time you work it all out, you're so far down a hole that saving a bit of interest simply won't make a great deal of difference,.

• You've undoubtedly reached the stage where you've had enough, you're emotionally drained, you can't go on one more day ignoring blocked calls on your phone, ignoring the demands in the mail and so forth.

Personal Insolvency Agreements

So when it relates to Bankruptcy in Australia, what's the difference between a Debt Agreement and a Personal Insolvency Agreement?

Overall flexibility is the main point Personal Insolvency Agreements (PIA) have in their favour. They're also administered by a registered and - may I add - regulated trustee including the government trustee ITSA, and not a private company that advertises on TV. Essentially this method is similar to Debt Agreements (DA): The trustee holds a meeting with the people you owe money to and these experts mediate a deal on your behalf. You can give a lump sum settlement figure or enter into a payment plan, or maybe you can offer them assets as an alternative to cash. This can sound acceptable when it comes to the problems with Bankruptcy-- that is until you discover that one of the problems with PIA's is that 75 % of the people you owe money to must agree on the deal. If they don't, your plan is rejected or ought to be renegotiated.

Generally the people you owe money want all their money back in addition to interest. Sometimes they'll opt for beneath the amount you owe them - it's normally a percentage of the debt-- but let me stress this aspect: because of all the variables involved in the negotiation process to put together a PIA its difficult to put a figure on what the people you owe money to will truly settle for.

Most of the time you'll have to pay back 100 % of the debt owed. This is not because your creditors are greedy or have a mean streak, it's because the administrators take 20 % of whatever is decideded upon with the people you owe money to. That applies whether you use a private company for this process or ITSA, the government body setup to administer to these PIAs.

When it comes to Bankruptcy and insolvency I've come across creditors settling for less 80 % on rare occasions, but that usually only occurs with a public company entering into receivership owing huge sums of money (the kind that makes the news). If you are were owed $10million and you know the people who owe you the money have a team of wise lawyers and some very clever frameworks in place and they offer 5 % of the debt, you might take it and be grateful. Sadly, ordinary punters like you and me in Australia aren't going to get that lucky!

If you would like to learn more about what to do, where to turn and what questions to ask about Bankruptcy, then feel free to get in touch with Bankruptcy Experts Australia on 1300 795 575, or visit our website:bankruptcyexpertsAustralia.com.au.