When you fall into a situation where you can’t make repayments on your debts and, are in arrears with your accounts, you may feel there is no other option except to declare bankruptcy.
But unfortunately being bankrupt has long term implications on your credit, and you could regret taking this decision. A bankruptcy listing can remain on your credit file for up to 7 years, which makes applying for any credit in the future very difficult. You need to avoid going bankrupt and consider what avenues are available to you before filing for bankruptcy.
Contact Your Creditors
It’s easy to bury your head in the sand, but you should contact the people you owe money to. Phone your bank or creditors and explain your financial situation. Ask if you can arrange a payment plan to bring your finances back in control.
Your creditors are entitled to ask what you propose to do to meet the terms and conditions you accepted on taking out the credit card or loan. Answer honestly about the steps you propose to take to resolve the situation.
Hardship Application
One option to avoid going bankrupt is to apply through the Uniform Consumer Credit Code for a hardship application. If you can prove your financial situation is only temporary and can show how an adjustment of the terms of your debt could help you, your credit lender may agree if this will make you solvent again.
Restructure Finances
Becoming unemployed or other changes in your income can radically affect your ability to maintain payment requirements. Once you are aware this is happening you should try and restructure your income and expenditure before it gets out of control.
There are several options you can consider to avoid going bankrupt such as consolidating your debts, reducing interest on credit cards by transferring your balance to a zero or lower interest card, trying and minimising monthly repayments. Sell any items you don’t use or want, to clear some of the debt. Look at ways to increase your income.
Debt Agreement Part IX Bankruptcy Act
If the above steps don’t work, attempt to make a formal agreement with creditors, whereby you offer them a settlement figure. This can stabilise the amount of the debt, and stop it accelerating with penalty fees or interest. After making this arrangement you will need to maintain payments as agreed, to avoid landing yourself in greater difficulties.
Ask for Help
As a last resort contact a community help service, who usually have counsellors available to offer financial advice, such as Centrelink, Salvation Army or St. Vincent de Paul. In time, you will be able to overcome your financial difficulties.
