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I'm Heavily In Debt; Should I Declare Bankruptcy?

Q&A General 27 Jul 2017

I have $180,000 credit cards debt and no assets, each month I can only manage to pay for the minimum, what should I do? Should I declare bankruptcy?

1 Answers

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Thank you for the question. In answering your question, I'd like for you to think through these questions below:

1. "What is your current and future employment goals?"

2. "What is your current and future income?"

3. "How did you accrue this level of debt?"

4. "Do you receive or pay any government benefits?"

5. "How likely are you to file proceedings against anyone or an organisation in court?"

6. "Do you travel overseas regularly?"

7. "What does financial freedom mean for you?"

All these questions are relevant to your decision. Bankruptcy will have a major impact on any of the above listd questions and we'd encourage you to seek legal advice before you make any decision to that effect. 

Generally, bankruptcy may last for about 3 years, 1 day, once declared. If you declared bankruptcy personally, you'd have to appoint a trustee to work with you and your creditor to achieve a fair outcome for both parties. Most personal debts - including the credit card debts you mentioned - may be forgiven. However, if your income exceeds a certain bracket, then you may have to make compulsory payments or you may not be able to enter this agreement at all.

Bankruptcy declarations are listed on a public register. It is also listed on your credit file for a period of no lesser than 5 years. This may have an impact on your future ability to get credit and most importantly your ability to get  employment, maintain your current employment or run a business. You may also find that you have restrictions on overseas travel.

Now, let's consider the alternative. It may be beneficial to review your money matters with a qualified financial adviser. This will give you an opportunity to explore different avenues of helping to manage this debt in a matter that may not have unnecessary impacts on your future earning capacity and lifestyle choices. A financial adviser will work with you to understand all income sources and look at the best way to tackle this debt as the best way depends on your personal circumstances such as age, income, other commitments etc. It is important to also understand the history behind the credit card debt accruing to such levels. After which, most advisers will work with you and/or creditors to come to a reasonable payment arrangement that may help in reducing the burden on you and keep you on track to becoming debt free and thus enjoy future financial freedom.

Frankly, there isn't an easy way in paying off $180k of credit cards. Once an assessment is done, a qualified financial adviser will be able to provide you with all your alternatives, including bankruptcy. It's very important to understand the entire picture before making any decision in isolation.

 

General Advice Disclaimer
Note: This advice is of a general nature only and does not take into account your personal situation and all of your objectives, your financial situation or needs. Before making any decisions you should seek advice from a professional, qualified financial adviser.
Andrew Akuoko
Andrew Akuoko Wealth Peak Financial Advice

Adv Rating 90% Cust Rating 100% Reviews 11

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4 comments

"Ken, sometimes it's the individual that doesn't provide all information to the lenders. In most instances like this it's a case of irresponsible borrowing as I'm sure that no lender would offer up additional credit if told that you already had significant unsecured debt and no assets. In addition, I'd venture that the debt has ballooned due to only minimum payments being made compared to the rate at which the interest is accruing. Based on the information provided, none of these credit card providers are ever going to get anything back. The option of requesting the write-off of a significant proportion of the debt (I would suggest 90%) from every lender, is the only feasible option to bankruptcy. However, some institutions would rather see you bankrupted to teach you a valuable life lesson about the inappropriate use of debt and to stop you from simply re-engaging in a similar debt binge if you aren't forced to experience some pain. It's a no-win situation all around but a valuable lesson to others about spending more than you earn. Live within your means, don't steal from tomorrow to spend today. "

Jimmy 15:31 on 20 Sep 17

"Getting proper advice in this area is vital. I was in a smilier position and my adviser was able to connect me with a debt negotiator, who helped by speaking to the banks (on your behalf) and negotiating a payment plan or even a reduction of your overall debt amount.."

Kylie 13:48 on 28 Jul 17

"A bit of irresponsible lending I assume ?"

ken Ryan 13:40 on 28 Jul 17

"How on earth do you get into credit card debt of $180,000?"

Andrew Bedford 13:29 on 28 Jul 17

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