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Case Study – Reduced Income

Adam was laid-off from his job where he was previously earning a good income. 

He contacted all creditors to discuss his circumstances and immediately applied for Hardship Relief.

Hardship was granted, however, it was only for a temporary period of 3 months.  After this time, Adam was expected to recommence repayments as well as make a catch-up arrangement for the payments he had missed.

As Adam was still unemployed, he was not able to start repayments again and shortly afterwards was notified that defaults had been listed on his credit file.

Adam has secured a new position, although it is for a much lower income than he was previously earning.

He applies for a Debt Consolidation Loan, however, due to recent account history and the default listings on his credit file, he is not approved for lending.  The debts which he was previously able to cope with are no longer manageable on his reduced income.

Some creditors have now sold his debt(s) to Debt Purchasing Agencies who are demanding unrealistic repayments.  Furthermore, they are threatening legal action if he does not make a lump sum repayment immediately

Adam does not want to go Bankrupt, however, he simply cannot manage the payments being demanded.  He does not know what to do next. 

 

Debt

Balance

Minimum Payment

Personal Loan

$30,000

$625 per month

Credit Card #1

$7,800

$234 per month

Store Card #1

$12,300

$430 per month

Credit Card #2

$6,500

$195 per month

TOTALS

$56,600

$1,484 per month

An overview of Adam’s Debts

Adam contacted the team at Life After Debt ®.

After discussing his full circumstances, he was advised that a Part IX Debt Agreement would likely be a good alternative.  Adam was made aware that;

  • A Debt Agreement is a compromise on unmanageable unsecured debts which enables the individual to avoid Bankruptcy. All unsecured debts must be included and Adam must meet certain eligibility criteria.
  • If his offer is accepted, he would have one manageable repayment based upon what he can afford, rather than what each Creditor is demanding.
  • Adam would have protection from any further collections harassment, legal or recovery action.
  • The interest on the debts is frozen.
  • Not all Creditors have to agree to the offer for it to be accepted. The outcome would be decided by the majority of creditors in dollar value.
  • A listing would be placed on Adam’s credit file which would remain there for 5 years and his details would be recorded on a Government database called the NPII.
  • As his Administrator, Life After Debt ® would receive an administration fee which would be deducted from his contributions to Creditors.
  • As the Debt Agreement is processed by AFSA, they would receive a realisations charge which would be deducted from his contributions to Creditors.

Summary Result (Once DAP Accepted)

  • Reduced repayments from $1484 p/m to $850 p/m (a reduction of $634 p/m)
  • Will be debt-free in 5 years if all contributions are completed as per the Agreement
  • Credit file listing will be removed in 5 years, or when the Debt Agreement finishes, whichever is longer
  • Creditors no longer bother him
  • Avoids further legal action 
  • Avoids Bankruptcy
  • Interest on debt is frozen
  • Total amount to be repaid is less than 100% of current balances due
  • Has a great sense of relief that he now has a manageable plan in place

If you would like to discuss your circumstances, please contact us for a free and confidential initial assessment.

** Please note that this is an example only, not an actual case.

***Minimum payments on credit cards and store cards are estimated using 3% of balance owing.