Filing for Bankruptcy in Australia– Choices, Choice, Choices.

When it comes down to Filing for Bankruptcy in Australia, there are a load of choices that we get given depending upon who we are, who we speak with, and just what has gone wrong. One of the most common confusion I see with Filing for Bankruptcy is when it comes to choosing between Debt Consolidation, Personal Insolvency Agreements, and Bankruptcy itself.

Insolvency, Declare Bankruptcy, How to File for Bankruptcy

Should I consolidate my debts?

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

I hate to tell you this but these guys won’t be doing it free of charge. Please don’t misunderstand me: if you consider your financial issues in Australia can be solved by paying less interest, then go on and consider the options. Even a small amount of interest saved over years rapidly adds up.

Normally I find if you are reading this blog you’ve undoubtedly attempted to consolidate your debts already and come to the following realisations like these:

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

– By the time you work it all out, you’re so far down a hole that saving a small amount of interest simply won’t make a great deal of difference,.

– You’ve likely arrived at the point where you’ve had more than enough, you’re mentally drained, you can’t go on yet another day ignoring blocked calls on your phone, ignoring the demands in the mail etc.

Personal Insolvency Agreements.

So when it concerns Filing for Bankruptcy in Australia, what’s the huge difference between a Debt Agreement and a Personal Insolvency Agreement?

Freedom 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 featuring the government trustee ITSA, and not a private company that advertises on TV. Essentially this process is similar to Debt Agreements (DA): The trustee holds a meeting with the people you owe money to and they arrange a deal in your place. You can offer a lump sum settlement figure or enter into a payment plan, or perhaps you can offer them assets instead of cash. This may sound alright when it comes to the troubles with Filing for Bankruptcy– that is up until you realize that one of the obstacles with PIA’s is that 75 % of the people you owe money to will have to agree on the deal. If they don’t, your plan is rejected or has to be renegotiated.

Generally the people you owe money really want all their money back in addition to interest. Sometimes they’ll opt for under the amount you owe them – it’s typically a percentage of the debt– but allow me to stress this part: 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.

In most cases you’ll have to pay back 100 % of the debt owed. This is not just 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 Filing for Bankruptcy and insolvency I’ve heard of creditors opting 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 clever 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 wish to learn more about what to do, where to turn and what questions to ask about Filing for Bankruptcy, then feel free to get in touch with Bankruptcy Australia on 1300 795 575, or visit our website: