Your Options

In dealing with financial difficulties, there are a number of options available to individuals to help them correct their situations.

Informal Arrangements

Usually the first step after realising that you are having issues with your finances is making informal arrangements with creditors for payment. Some creditors may be sympathetic to your circumstances and may offer you more time to pay, renegotiate repayments or even accept a smaller amount to settle the debt.

We have had experience in dealing with these types of negotiations and we believe that more often than not, these types of discussions produce the most cost effective results, and assist with opening effective communication with creditors.

Further information about entering informal arrangements can be obtained from our experienced staff or sourced from the MoneySmart website. MoneySmart is run by the Australia Securities and Investments Commission (“ASIC”) and offers free and independent guidance to assist in the decision making progress.

Debt Agreements

A Debt Agreement is a legally binding arrangement between you and your creditors under the provisions of the Bankruptcy Act. In order for a Debt Agreement to be accepted, 75% of creditors in value must accept your proposal. Usually these type of agreements offer a sum less than the full amount owed to creditors, usually payable in instalments or in a lump sum.

These types of agreements are regulated by the Australian Financial Security Authority (“AFSA”), which releases further details about the mechanics of such agreements on their website. Click here to read more on debt agreements.

Bankruptcy

In overall senses, bankruptcy is divided into the following two (2) key area, both of which Cor Cordis are experienced in dealing with:

  1. Voluntary bankruptcy (debtors petition)
  2. Involuntary bankruptcy, where creditors are seeking your bankruptcy (creditors petition)

In the event that you are unable to come to an arrangement with your creditors, and depending on the individual circumstances of your situation, the next logical progression is a bankruptcy appointment, either by making yourself bankrupt through a debtor’s petition, or one of your creditors making you bankrupt through a Sequestration Order.

Bankruptcy matters are usually more complex than Debt Agreements as they involve a certain level of statutory investigations and communications that must be undertaken by a Trustee (irrespective of type of bankruptcy), and focus around, among other things, the following:

  • Notifying creditors of your bankruptcy;
  • Investigating your asset holdings to determine if you have sufficient property that can be sold to enable a dividend to be paid to your creditors;
  • Determining if any property has been sold / transferred / gifted or otherwise to a place out of reach of the Trustee’s influence; and
  • Consideration as to whether you have committed an offence under the Bankruptcy Act 1966.

Bankruptcy generally lasts for a minimum of three (3) years which can be extended for longer in certain circumstances. At the expiration of the bankruptcy period, you are released from most of your debts.

Bankruptcy is a very powerful tool that can be used to manage debts, but also enforce them. We encourage clients considering this path to assess their option thoroughly and seek guidance where required.

Further information about bankruptcy and its effects can be found on AFSA’s website or through our office.

Personal Insolvency Agreements

A Personal Insolvency Agreement, like a Debt Agreement, is also a legally binding arrangement between you and your creditors for the payment of part, or in full, of your outstanding debts. However, unlike a Debt Agreement, there are no debt, assets or income limits that need to be considered when entering into these agreements.

Initially, a controlling Trustee is appointed to take control of your financial affairs and to write a report to your creditors in order to convene a meeting of creditors to consider the relative merits of the proposal you wish to submit to your creditors to deal with your insolvent estate.

At the meeting of creditors, your proposal must pass by a special resolution of your creditors, which requires, amongst other things, that the minimum of 75% of creditors who are present, to vote in favour of the resolution. The nature of your proposal will determine if a formal Deed Agreement is required to by drafted and executed. Upon acceptance of this proposal, a trustee is appointed to administer the agreement to ensure that the terms of the arrangement are met.

Further information about personal insolvency arrangements can be found on AFSA’s website or through our office.