When people are faced with extreme amounts of debt and don’t have enough funds to repay all of these debts, the most common thing they do is declaring bankruptcy. However, recent figures show that Australians favouring debt agreement more than bankruptcy due to its obvious less extreme consequences.
According to the Australian Financial Security Authority, there was an 8.1% decline in personal insolvencies in the December 2014 quarter since the 2013 quarter. There was a 13.7% drop in bankruptcies as well. With the decline in personal insolvencies and bankruptcies, debt agreements increased by 2.5% with Northern Territory and South Australia having the highest on record.
Most Australians live beyond their means, accumulating credit card bills and phone bills with little to no chance of paying them back anytime soon. Especially the younger generation that are well dressed and use the latest high tech gadgets are those who are in debt. Living the high life is one of the things that most young Australians seek to do, resulting in accumulating debts and facing financial problems at a young age. So in order to get rid of these mounting debts, more young Australians have been signing debt agreements as an alternative to going bankrupt. Homeowners and other mature adults on the other hand are more disciplined in managing their finances.
A debt agreement is an arrangement between the debtor and creditor or creditors to settle the debts in a more affordable way. This agreement freezes interest and stops the creditors from any more harassment until the debts are repaid. It is a better alternative to bankruptcy which has long lasting consequences on your credit score.
This agreement helps you roll all your debts into one regular repayment over a fixed period that your creditor agrees to according to your agreement proposal. And a substantial portion of your debt can also be written off by your creditors if they agree to your proposal itself.
If you decide to propose this agreement, you should also know what it could do to your credit file. During this agreement, you will be required to stay on a budget in order to keep your end of the agreement in making regular repayments. The agreement will be recorded on a public register which is accessible by any potential loan providers. It will exist on your credit file depending on the agreement period. You must declare your assets and liabilities but you have the ability to retain them.
There are many differences between bankruptcies and debt agreements, with the latter being more favourable. To find out the best debt solution that can suit your needs, contact Just Budget and one of the friendly consultants will explain all the pros and cons of all available options.