When you’re in financial hardship, these are your options
We’re here to help you reduce your debt and find a way forward. Understanding your options is the best first step.
Option One - Do Nothing
By the time you're reading this you have already explored this option with little joy and concluded this debt relief solution gets you nowhere.
To seek debt assistance you can deal directly with your bank, under section 72 of the National Consumer Credit Protection laws (NCCP) you can apply for Hardship arrangements which may include payment holidays, interest free periods, temporary reduction in your payments, loan rewrites etc. This may help you with your debt reduction.
The banks are required to consider your debt assist application however they are not obliged to provide debt assistance if their not convinced of your hardship case. Unfortunately under the NCCP laws it is at the discretion of the bank to consider if you are suffering financial hardship. At this stage you have the option to appeal to the credits Financial Ombudsman or take the matter civilly against your creditors.
More often than not people will face the full force of the banks collection activities which include phone calls, collection letters, credit defaults and possible legal action.
Eventually the debt could be sold to a professional debt recovery agency who takes collections to a whole new level and you will not be protected under the NCCP laws.
Option Two - Financial Counsellor
The role of a Financial Counsellor is simply to mediate between yourself and your bank with the aim to set up an ongoing payment arrangement under Hardship circumstances. The reason why people use the service of a Financial Counsellor is that they are much better informed of your rights under the NCCP laws.
A Financial Counsellor may also suggest other options available to you including Bankruptcy & Part IX Debt Agreements.
Option Three - Part IX Debt Agreement (Bankruptcy)
Part IX Debt agreement is part of the Bankruptcy Act, successfully applying for a part IX is technically Bankruptcy and you will be listed accordingly on your Credit Report.
However there are some major differences, a Part IX insolvency allows you to pay your debts off interest free at a reduced amount over a period of 3 to 5 years to the Bankruptcy estate. For example, if you owe $50,000 on Credit cards, a successful Part IX could reduce this to $45,000 and you pay this amount off over 5 years interest free (not including Part IX costs).
Option Four - Bankruptcy
If you are unable to come to a suitable repayment arrangement with your creditors, you may voluntarily apply for bankruptcy. Bankruptcy creates an estate in which your assets are liquidated and the funds distributed towards your creditors.
The benefit is that you will be relieved by the growing debt pressure. However Bankruptcy could stop you from travelling overseas, will affect your Credit Report and the Bankruptcy Estate could Garnishee your income.
Option Five - Debt Reduction and Elimination is Possible with Credit Mediation Services
Debt negotiation is an honest and effective alternative to the above mentioned programs.
Debt Settlement programs can be the most assertive way to handle your debts. We aim to negotiate with all of your creditors to reduce your debt level down to a manageable level, within three weeks you could owe half of what your debt level is today.
We work for the consumer, you, not the creditor. This process generally allows you to handle your debts in a much shorter time frame than any other program.