With over 25,000 personal bankruptcies declared in Australia between 2013 and 2014, it is increasingly important for individuals to be aware of their financial situation and work to prevent bankruptcy from occurring.
Declaring bankruptcy is a serious step that may have long-term consequences on your career and ability to source finance. When facing personal financial turmoil, Insolvency Services Australia recommends considering a Personal Insolvency Agreement (PIA) as a legal alternative to bankruptcy. A Personal Insolvency Agreement is a legally binding arrangement with your creditors whereby you will commit to paying a certain amount in order to settle your unsecured debts. Your creditors then freeze your debts so that they will stop accruing interest and charges, and over the course of the agreement they will receive a percentage of the frozen debt. In order for a PIA application to be accepted you need at least 75% of your creditors (in value) and 50% (in number) to vote in favour of it at a creditor meeting. Once it has been accepted the PIA becomes binding on all unsecured creditors, even those who may have voted against it. Whilst you are under the protection of an active PIA no unsecured creditor is able to try to have you made bankrupt.
A PIA is an excellent alternative to bankruptcy for those who stand to be particularly adversely affected by it, such as those with a property or who need to travel overseas often. Not only will a Personal Insolvency Agreement help you save your house but it will also stop your creditors from forcing you into bankruptcy. So long as you maintain your mortgage repayments and complete your PIA your home should be safe. Furthermore, if you need to travel overseas for any reason, there will be restrictions on you.
For more information on Personal Insolvency Agreements and how Insolvency Services Australia can help you to propose one, contact us today on 1800 003 883.