• Personal Finance Basics
  • Handle Money

The internet is full of advice about how to save $3 by taking lunch to work and $5 on toilet paper. That stuff is great, and I’ve written a lot of articles like that myself, and they are always popular.  Who doesn’t love saving $1 on coffee? The truth however for most people who call us, no amount of living on noodles and tuna and cancelling their Netflix is going to get them out of debt. If your income is $1000 a week and your mortgage is $750 a week, and your credit card repayments are $300 a week, no amount of making your own laundry detergent is ever going to get those ends to meet.

If your situation is temporary, applying for Hardship with your lenders can be a great option.  If your income is temporarily reduced, for example, you had your overtime cut, or your expenses are temporarily high, for example, you’re car blew up, Hardship can be fantastic. Hardship, however, will not permanently alter your repayments. Even if your situation is permanent, Hardship can buy you some time to decide what to do.

If your expenses are bigger than your income, you’re insolvent, and there are three major options.

1.    Debt Agreement

2.    Personal Insolvency Agreement

3.    Bankruptcy

Debt Agreement

A Debt Agreement is a form of insolvency where you make an offer to your creditors based on what you can afford.  For example, you could afford half of what you are currently repaying, so you offer half to your creditors over five years.  It’s under the Bankruptcy act but is considered an “Alternative to Bankruptcy”. There are restrictions on how much you can earn and how much debt you can have but 95% of Australian’s qualify.

Personal Insolvency Agreement

The Personal Insolvency Agreement is for the other 5% of people. Similar to a Debt Agreement you make an offer to your creditors based on what you can afford. They are generally for people who have more than $100k in debt or have high incomes.  Other people who are eligible for a debt agreement may choose to do a PIA because it offers more flexibility as there are no criteria.


If you can’t afford to repay your creditors anything or paying your creditors would cause significant financial difficulty, Bankruptcy may be a great option. It’s not a punishment but rather an option for people who will never be able to clear their debt to get a fresh start. There are consequences, but they are generally limited to the sale of some assets (you can generally keep your car and a lot of times your house),  travel overseas can be restricted for three years and there are certain employment restrictions.

For more information, please contact one of our Debt Consultants at Beyond Debt.


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