When To Choose
A Form Of Bankruptcy
Choosing to enter a debt agreement is not as easy as it might sound. They are often presented as ‘fix-all’ solutions, but this is an over simplification.
Firstly, you must not consider a debt agreement to reduce your repayments and pay back your debt interest free. It is not a debt consolidation program in the sense of shopping around and finding a cheap solution. To do that you should consider zero percent interest credit cards.
A debt agreement is part of the Bankruptcy Act in Australia and is a form of bankruptcy under which you still make repayments. This will have the same impact on your credit rating as if you decide to go bankrupt.
Get Independent Advice
Bear in mind that some promoters of debt agreements may have a vested interest when telling you that a debt agreement will work for you. They get about 25% of all the payments that you make over the period of your Debt Agreement, which is commonly over 3 to 5 years.
A1 Debt Assistance are a full service debt solution business. We use a nominated Debt Agreement administrator if we feel that a client benefits from a Debt Agreement. As such, we do not get the 25% incentive to promote a Debt Agreement over other Debt Solutions. Therefore we are unbiased when considering the best solutions for you and this will depend entirely on your personal circumstances.
There are numerous other examples of situations when a debt agreement may suit you, to find out more please feel free to contact us.
The Perfect Solution
In certain circumstance you can benefit greatly from a debt agreement instead of Bankruptcy. For example, you have a mortgage, a car and have some equity in these items. If you own property with your spouse, divide the equity, and calculate how much your share would be valued at. Your sole equity for assets should not exceed $108,126 and your annual net income must be below $81,122 net per year – take note that this threshold changes on a regular basis. A debt agreement would potentially protect your home in the above example.
However, under bankruptcy you would lose your home with such equity and you would most likely have to make income contributions based on your income being over certain threshold levels – in such a case, a debt agreement is the perfect solution to give you an immediate break from debts and save your home. It gives you time to rebuild your financial position and get back on course.
Perhaps your situation can still be helped with some assistance with re-structuring your household budget. A good budget can let you avoid any bankruptcy if done in time.