These days, getting in debt becomes inevitable to most people. There is actually nothing wrong with borrowing money from various parties for different purposes. However, problems occur when you lose or deplete your regular income. Because loans continuously incur interest payments, you may eventually find yourself getting deeply indebted. Bankruptcy could be an ideal option.
Ideally, filing for bankruptcy should be your last option to deal with your numerous and unmanageable debts. Many Australian consumers now think going bankrupt is an attractive way out from a troubling debt problem. It could be but it certainly is not coming without any unlikely consequences. As much as possible, you should strive harder to avoid filing for one.
When should you declare bankruptcy?
If you think you would be unable to handle and pay all your outstanding debts and you could not get into a likely arrangement with any or all of your creditors, you should voluntarily file for one. It is called a debtor’s bankruptcy petition. Be aware that if you do not file for one, your creditors could also file to declare you bankrupt. Either way, the consequences would surely be serious. It would remain in your credit report for about seven years after you have emerged out of it.
Possible alternatives
As mentioned, bankruptcy should be your last resort. As much as possible, you should try hard to avoid it. Before considering giving up, you may try getting into negotiations with your creditors. Aim to make an informal or debt settlement agreement with them. This way, you could get better and more comfortable payment terms, which may also involve debt reduction and elimination of interest payments or penalties. However, not all creditors could readily get into such an agreement.
On the personal level, you may start saving up to repay your debts. Debt consolidation could be a good option. It is a strategy wherein you would get a new and significant loan to repay all your other debts in full. You could get a debt consolidation loan with lower interest costs and longer terms (with lower required regular repayments). At the same time, you may also initiate and adapt better money management to improve your personal finances.
Declaring bankruptcy
Bankruptcy is becoming more common worldwide. In Australia, you would have to coordinate with the Insolvency Trustee Service Australia or ITSA to discuss your options. If you are determined to file for a debtor’s petition, you could immediately get and fill up an application form and a statement of affairs. The statement of affairs is a complete disclosure of your outstanding debts and all assets.