Debt Agreements can be a versatile solution for people struggling with debt, however they are not a “one size fits all” debt consolidation plan and care should be taken by debtors wishing to explore this option
Sydney, NSW, Australia (PRWEB) May 01, 2013
The Federal Government through its Government Agency ITSA (the Insolvency and Trustee Service of Australia) has released statistical information showing bankruptcies are at their lowest levels. Indeed, all personal insolvency activity is down on previous quarters:
“...All states and territories except the Northern Territory recorded falls in total personal insolvency activity in the March quarter 2013 compared to the March quarter 2012.…”
Only the Northern Territory bucked the trend with total personal insolvency activity recorded in the March quarter 2013 the lowest level recorded in a quarter since the June quarter 2006.
A possible underlying reason for the reduced number of insolvencies could be attributed to record low interest rate and central bank policy geared at increasing demand throughout the economy.
Grant O’Donnell, director and founder of Debt Fix (one of Australia’s largest debt agreement companies) said;
“...Over the past few years, people have become motivated to reduce their debt and risk. The figures indicate lower interest rates have provided a debtor the means and opportunity to settle debts as opposed to gearing up…”
These sentiments may account for the fact that the retail sector has not experienced the turnaround it was expecting and that people have opted to become fiscally responsible at home, when the opportunity presented itself. Even though bankruptcies are down, not all insolvency activity dropped at the same pace suggesting that other insolvency instruments available to debtors continue to remain a viable alternative.
For instance, Part IX of the Bankruptcy Act 1966, (also commonly known as Debt Agreement), provide debtors with an alternative mechanism to mutually settle unmanageable debt as opposed to full blown bankruptcy, where in most cases debtor’s walk away from their debts.
Last year, Debt Agreements returned more than $100m back to creditors in comparison to bankruptcy, significantly less money was returned to creditors.
Mr O’Donnell went on to say;
“…Debt Agreements can be a versatile solution for people struggling with debt, however they are not a “one size fits all” debt consolidation plan and care should be taken by debtors wishing to explore this option…”
According to ITSA’s statistics released today, “…There was no change in the number of new debt agreements in Queensland in the March quarter 2013 compared to the March quarter 2012...”
Statistically speaking, this downward trend should continue as long as monetary policy remains tight and inflation remains in the RBA’s acceptable band range. Grant O’Donnell believes Interest rates and insolvency levels are linked; “…it’s true that Interest rates are presently at historic lows and whist some economists believe that the Reserve Bank still have opportunity available to reduce interest rates further, at some point in the foreseeable future interest rates will be on the rise. Coinciding with this, insolvency numbers will be on the rise as sure as night follows day…” he says.
Despite the statistics, it should be noted that there are many thousands of Australians doing it tough. If people aren’t spending money on goods and services, opting rather to pay down debt, businesses go bust, unemployment rises and economies fail.
ASIC’s MoneySmart Website provides trusted guidance when it comes to dealing with debt and all money issues. Mr O’Donnell advised;
“…Debtors need to seek help from trusted professionals when it comes to managing money. At the end of the day, there is always a solution and if you happen to be struggling with debt, the worst thing you can do is ignore the problem and hope that it corrects itself…”
For more information, contact Debt Fix 1300 332 834