Many Australians are in financial difficulty at the moment. In this scenario, opting for a debt agreement may be the solution to economic recovery, which brings us to our subject – bankruptcy and part IX debt agreement.
The question that immediately arises is what differentiates bankruptcy from part IX debt agreement?
Bankruptcy is the legal condition of insolvent individuals when a trustee assists you to recover from the situation. Meanwhile, a part IX debt agreement is an arrangement through which your creditors accept to receive a sum of money and, in return, you’re released from part of your debt.
Some quick facts
- Since 2000, the living costs in Australia have constantly been on the growth. Nonetheless, according to the Australian Bureau of Statistics, people’s salaries fail to keep up. Hence, the immediate solution to this problem is putting everything on credit.
- Australia is one of the world’s primary markets for credit card users, and the debt reached about $50 billion in 2011 and is continually increasing.
- In 2010, economists predicted a rise in bankruptcy, which we’re dealing with today.
Keep on reading to find out more about the two financial statuses.
Understanding full bankruptcy
When you’re bankrupt, it means that the law admits that you are unable to meet the financial obligations to your creditors. You can either become bankrupt voluntarily, by simply lodging a debtor’s petition or you may be declared bankrupt as a result of court action.
Once you’re declared bankrupt, you are appointed a trustee, who will assist you in your financial recovery. That may require you to sell your assets. Bankruptcy lasts for three years. During this time span, creditors cannot demand payment. At the same time, after your bankruptcy is over, you won’t have to pay additional debts.
Concerning unsecured debts, creditors receive a part payment that results from the selling of your assets. Although your assets are sold while being bankrupt, some of them are protected. See this source for details.
Nonetheless, as you would expect, bankruptcy, similar to other debt agreements, remains on your credit history. Concurrently, note that credit report agencies keep track of your bankruptcy for up to five years, sometimes even more.
Understanding part IX debt agreement
A debt agreement consists of an arrangement between you and the creditors who accept a certain sum of money in exchange for part of your debts.
As a debtor, you can propose a particular debt agreement, which, afterward, should be approved by the creditors. If they accept your conditions, you proceed with paying the sum of money you can afford, and in this way, diminish your debt. Typically, fees and interest rates are frozen as long as you pay the agreed amount of money.
In comparison with being bankrupt, when you opt for this agreement, you aren’t required to sell your assets. On the contrary, you can proceed with purchasing assets, something you cannot do while being bankrupt.
In a nutshell, both debt agreements and bankruptcy are serious concerns, which make it primordial for you to handle the situation professionally, to reduce the severity of the consequences. Professional advice may be imminent in such instances. Did you ever experience bankruptcy? Do you recognise the importance of professional advice?