Bankruptcy is not the only option

Often people are faced with an ongoing struggle to meet their current financial commitments, which is accompanied with the feeling that it is all too hard. This is so overwhelming that they believe it would be easier for all parties concerned if they were to simply file for Bankruptcy. This is not the only option available to an individual who is unable to pay their debts and there are other options available. These should be seriously considered before any decision to go bankrupt is made.

The alternatives available to an individual are as follows:

1. Discussing your difficulties with your creditors

If you have a regular income the creditors may agree that you can pay them off over time. Informal arrangements like this however may not be binding on creditors, thus they could change their minds and start action against you to pay in full. This is most likely to happen if you fall behind in your payments. This option in reality is only workable when one has a small number of creditors.

2. A Debt Agreement under Part IX (Nine) of the Bankruptcy Act

This is a streamlined low cost process by making a formal proposal to your creditors to pay all or part of your debts. Creditors can accept or reject your proposal.

One can only make a debt agreement proposal if you have:

• Not been a bankrupt, used a debt agreement or signed an authority under Part X (Ten) of the Bankruptcy Act in the last 10 years
• Unsecured debts less than $109,036*
• After tax income of no more than $81,777* a year

A registered bankruptcy trustee can assist you to make a debt agreement. The proposal for a debt agreement and the debt agreement however become public record.

3. A Formal Arrangement under Part X (Ten) of the Bankruptcy Act

There are three options available under Part X, each binding on you and your creditors. To take up one of the options, which avoid bankruptcy, you will need either:

• A steady income
• Funds from a family member
• Assets to offer your creditors

In all of the above cases a Registered Bankruptcy Trustee is in the best position to consider the relevant facts and advise on the practicality of a given option.

Macks Advisory is a firm that practices exclusively in the areas of insolvency and business reconstruction and members with queries are invited to contact Peter Macks at Macks Advisory on 08 8231 3323 or by emailing pmacks@macksadvisory.com.au.

* Current as at 27th April 2016 and regularly indexed