However much you’re struggling to manage your debts, it’s important to realise that you still have options. Filing for bankruptcy isn’t the end of the world, but it can have significant ramifications and is best seen as a last resort.

The Bankruptcy Act 1966 provides several formal pathways you might be able to choose as an alternative to declaring bankruptcy. Here, we briefly outline some of these options.

1. Make a declaration of intention to lodge debtor’s petition (DOI)

Do you need more time to decide what to do about your financial situation? A DOI is a 21 day ‘freeze’ that can temporarily prevent some creditors from taking actions to recover what you owe them. A DOI doesn’t necessarily make you bankrupt, and isn’t recorded on the National Personal Insolvency Index. That means if you lodge one, it won’t be made public. It’s important to note that:

• A DOI only protects you from the recovery of unsecured debts. Creditors for secured debts (those backed by collateral, like a car or a property) may still be able to seize your assets.
• Your creditors can use your DOI as evidence that you can’t pay your debts and ask the courts to declare you bankrupt.
• You might not be eligible to lodge a DOI, for example, if you’re already bankrupt, or have a debt agreement or personal insolvency agreement ¬– both of which are explained below.

2. Make a debt agreement

A debt agreement is a legally binding arrangement you may be able negotiate with your creditors to settle your debts.
A debt agreement might be beneficial for both you and your creditors; it can provide you with relief from financial distress and allow them to recover more money than they would if you were bankrupt. A debt agreement will let you:

• repay a portion of your total debts that you can afford over time
• pay a debt agreement administrator rather than individual creditors
• be free from most unsecured debts when agreement is completed.

Debt agreements do have restrictions and consequences. For instance, they’re only available for certain kinds and quantities of debt, involve a fee and will still affect your credit rating. You can’t make a debt agreement if you’ve ever declared bankruptcy before.

3. Make a personal insolvency agreement

A personal insolvency agreement (PIA) is a more serious agreement you could negotiate with your creditors to avoid bankruptcy. It involves the appointment of a trustee – an independent third party who’ll take control of your assets and make an offer to your creditors about the repayment of your debt.
Unlike with debt agreements, there are no debt, asset or income limits that could disqualify you from a PIA.

If you’re facing the prospect of a personal bankruptcy, it’s important to seek advice from a trustworthy insolvency consultant as soon as possible. They’ll guide you through the most appropriate options for your situation and give you the support you need to clear your debts correctly. Call one of our insolvency experts today.

* The information on this page should not be taken as legal advice.