Australian Financial Solutions

How to Get Rid of Debt for Good

December 1, 2011

How to Get Rid of Debt for Good

The majority of people are in some type of debt, whether it be owing money on a mortgage, not being able to pay bills, having credit card debt, or simply not being able to pay your phone bill. There are a number of simple solutions to help you battle debt, whether you need a lot of money or a little just to scrape by. We have outlined some of the possible solutions and tools to help you along the way below:

Informal Arrangement

This type of agreement is best for those with short-term or one-off debt problems. Maybe you are finding it difficult to make a repayment or pay off a bill due to other financial constraints. This arrangement is informal, meaning you make an agreement with your creditors that isn’t contracted – simply a spoken agreement that they will hold off on collecting your payment until a specified date, or you will make a smaller repayment.

Debt Agreement

This is the formal version of the above – a written, contracted agreement with your creditors to pay your debt off in a different way than initially contracted. This usually means paying off a debt over a longer period than before, and all interest is stopped. There are a number of criteria to be met if you wish to enter into a debt agreement – take a look here for more information. If you do choose to go down a debt agreement path, whether it be formal or informal, we recommend using budget tools and carefully monitoring what you and your household spends money on every month.

Loan Refinancing and Debt Consolidation

This is for those who are in a little more financial trouble than just needed a spoken informal arrangement. Loan refinancing is just as it sounds – acquiring a new loan to replace your existing one, with different conditions and payment details. This could be a home mortgage, personal loan, or other loan. Debt consolidation equates to bundling all your debts together so that you only have one payment to make each month or payment period. We recommend this, as it is much easier to keep track of what you owe and what you have paid, plus can also lead to lower interest rates and repayments.

Personal Insolvency Agreement

A person will enter into a Personal Insolvency Agreement, also known as a Part X, after they have attempted to use an informal or formal debt agreement. There are a number of different versions of a Personal Insolvency Agreement, and it does all depend on your creditors and advisors, and which avenue you choose to go down. This could mean a sale of all your property, (take a look at bankruptcy below), or your creditors may choose to allow you to make payments in installments over time. There are a number of conditions related to a PIA, so take a look here if you’d like to know more.
Bankruptcy

Bankruptcy is a scary word, but as we know from the current economic climate, it isn’t all the uncommon. It is definitely only to be used as a last resort however, and all of the above avenues should be utilized before you consider bankruptcy. Bankruptcy can be voluntary, or can be forced if your creditors choose to take you to court over unpaid debts. More information about bankruptcy can be found here.

Although all of these solutions are extremely effective, it can be difficult to decide which avenue to go down, or what is best for your financial situation. At Australian Financial Solutions, we endeavor to eliminate the jargon, and set everything out plainly for you, so you can see your options and we can advise what might be best for your situation.

Contact us now on 1300 237 669 or enquire online for a free Financial Assessment, or to have a chat to one of our experienced finance professionals.

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