How to avoid bankruptcy and save your assets
Avoiding bankruptcy is possible. There’s no doubt about it, debt can be pretty crippling if you let it get out of control. But if you think your debt has become unmanageable and your assets are at risk, don’t despair – because as bad as you think your situation may be, there are 6 steps you can take to pull you back from the brink of bankruptcy.
Know your rights to avoid bankruptcy
A good place to start is to know your rights – and your responsibilities – if you owe a debt. The Australian Competition and Consumer Commission has informative resources that are worth a read if you’re in financial trouble.
Don’t let the situation get so dire that the debt collector comes knocking on your door (which, by the way, they can only do once a month and then only if they have been unable to reach you by phone). As with most things, it’s always better to be on the front foot so make sure you reach out to your creditors before they start reaching out to you.
Never be ashamed to admit that things are a bit tough financially for you – most lenders and other creditors would rather agree to a repayment plan with you early on than have to chase you for non-payment a few months down the track. It will also stand you in good stead if things go a bit pear-shaped later on as you’ll be able to demonstrate a willingness to try to pay off the debt.
Make sure all the debt is in fact yours
If you don’t already do it, make sure you check every line on your credit card bill to confirm all of the charges are yours. Online credit card fraud is a booming business, with transactions made using stolen credit card details nearing half a billion dollars annually in Australia.
Restructure or consolidate
When things begin to get out of control, the sooner you start planning to get them back on track the better. If you’re struggling with your mortgage talk to a mortgage broker about restructuring it. A few years with an interest-only mortgage won’t help you reduce your debt, but it might just buy you some time to get on top of your financial situation. Also consider a Mortgage Offset Account which can save you a lot of money on the life of the loan.
If you have a lot of different debts spread across multiple creditors, think about consolidating into a single debt. This is often a lot easier to manage and you’ll probably end up paying less interest too. (Related article: How to improve your credit score)
Understand what you can afford to lose – and what you can’t
For most people who get in trouble financially, the main cause of stress and worry is what’s going to happen if you can’t come to a workable payment arrangement with the organisation you owe money to.
If you’ve reached this stage the first step should be to figure out what you can’t afford to lose and then focus on an asset protection plan of attack. If you’re behind on your mortgage and the bank’s about to foreclose, then you’re probably starting to slide down the slippery slope towards bankruptcy unless you have some solid equity in your home and the market is buoyant.
For the majority of people faced with foreclosure, protecting their home is their number one priority, for others its protecting a trading license or a business – but whatever your number one priority is, now’s the time to acknowledge that you can’t afford to lose it. Everything else you can probably live without and rebuild over time, so start thinking about selling off some of those household goods that you really don’t need – you’ll get some extra cash to pay off debts and protect the more important assets.
If your debt situation is beyond these measures and spiraling further out of control, some outside help with a debt agreement might be the solution. A Debt Agreement has the following benefits:
- combining all your debts into one affordable regular payment,
- freezes all interest on your debt,
- possible reductions in your debt, as a debt administrator can negotiate with your creditors to ensure the payments are affordable,
- It can also help you avoid the devastating negatives of bankruptcy such as losing important assets and trading licenses that may have consequences for future income.
Here at Safe Debt Management, we’ve helped loads of Australians recover from their financial woes by stepping in to arrange a Debt Agreement with their creditors. We deal directly with the businesses you owe money to, so you don’t need to have those multiple awkward conversations any longer, and we take care of all of the paperwork for you.
Before you declare bankruptcy, find out how we can help you control your debt and make your life better. Ask us about debt agreements vs bankruptcy options specific to your situation. Get in touch today – you’ve got nothing to lose but your debt.