Alternative Debt Solutions to Bankruptcy?
When it comes to relieving significant debts, declaring Bankruptcy is perhaps the first thing that comes to mind. However, there are a number of Alternatives to Bankruptcy to resolve your debt such as payment arrangements with Credit Providers,
Choosing the Right Debt Solution for You
Whatever your current financial situation may be, Negociate Credit Solutions can help you find a Debt Solution that bests suits your current financial situation. Our experienced professionals can walk you through your options, so that you can make an informed decision about the best way forward.
Debt Solution 1: Payment Arrangement
This is a formal agreement between you and your Credit Provider that outlines how you will settle your unsecured debt outside of your original contractual agreement. A payment arrangement allows you to make fixed monthly payments that you can afford. This is reviewed every 6 months in line with your budget and income statement. It is important to note that your debt may grow during this period as interest rates are not adjusted. The term to settle debt will be also be extended.
Debt Solution 2: Debt Settlement
Debt settlement allows you to pay a lump sum that is typically less what you owe to settle your debt. This is done by negotiating a suitable settlement discount that is in line with the lower lump sum value that you have. You will benefit from early settlement discounts of up to 20% on current debt and 50% on debt that is handed over to collection agencies. As debt is settled early you will also be saving on the future interest charges that your Credit Providers would have added over the remaining term.
Debt Solution 3: Debt Consolidation
If you're struggling to keep track of multiple debts at varying interest rates, you may want to consider consolidating your debts into one monthly repayment, at a reduced interest rate. Consumers will also reduce admin and debit order fees charged by each Credit Provider. This option is recommended for consumers who have just started experiencing financial troubles, where the credit score has not yet been significantly impacted. Affordability will also play a key role in whether the consolidation will be approved or not.
Debt Solution 4: Debt Review
This is a legal solution approved by the National Credit Regulator and all registered Credit Providers in SA. A Debt Counsellor is approached to assist with this solution. A Debt Counsellor has the mandate to renegotiate original contractual agreements. The monthly installments and interest rates are reduced and the terms extended. Multiple Debt repayments are consolidated into one manageable monthly installment. A Payment distribution Agency distributes this payment to all your Credit Providers on your behalf.
Debt Solution 5: Bond Consolidation
This option is available to existing home owners that have enough available equity in the home loan to consolidate all debt. This is determined either by the difference between the current market value of your property in comparison with the original price paid, or the difference between the original price and what you owe now. The available equity must be enough to consolidate all of your debt. You not only benefit from early settlement discounts, but your credit score improves too.
What is Bankruptcy?
Bankruptcy is a legal process that provides protection when you are unable to pay back debt. This Debt Solution writes off 75% of your debt, the remaining 25% can be paid off in a manner that suits you. A Licensed Insolvency Practitioner will be appointed to manage your debt and Credit Providers. Once all legal processes are finalised, you will be rehabilitated and become solvent again within 24-48 months.
Bankruptcy is a high court application which legally writes off 75% your debt
You may often hear the terms “insolvency” and “bankruptcy” being used interchangeably, but they have different meanings.
What is Bankruptcy?
If you're receiving harassing phone calls from Credit Providers, have had assets repossessed and owe shortfalls, or are more than 6-12 months in arrears with debt then Bankruptcy is specifically designed for you.
You can think of it as a formal, structured process that allows you to make a fresh financial start completely debt free. There are pros and cons to this legal solution. We will explain every aspect of the process, including the advantages and disadvantages of declaring Bankruptcy.
How Does Bankruptcy work?
Bankruptcy is a legal process that provides immediate relief from the burden of debt. An assessment is conducted to determine which type of Sequestration or Bankruptcy Application will work for you. 75% of your debt is written off and there are 2 ways of paying off the remaining 25%. You decide which will work best for you.
Bankruptcy provides immediate financial relief from the burden of debt.
We conduct an Insolvency Assessment to determine which type of Sequestration or Bankruptcy solution will work for you.
There are 2 types of Bankruptcy:
1. Voluntary Surrender - Assets are used and converted to cash OR
2. Cash Sequestration - A cash payment is made to settle your estate instead of converting assets to cash.
75% of your debt is written off in both cases. The 25% remaining can either be paid off over 18 months or in one cash lump sum payment. If you opt for paying the 25% off over 18 months, assets will stand as surety during that period.
How it works:
A court date is obtained for the process. It can take 3-6 months to obtain a court date depending on the time of year e.g. the courts close in December/January so applying towards the end of the year may lead to dates in February/March of the following year.
One month before the court date an advert is placed in the Government Gazette. This marks the start of the Bankruptcy process.
Once the advert is placed, legal action from Credit Providers as well as garnishee orders on salaries stop.
Once the court order is granted 75% of your debt is written off.
Thereafter a Trustee, who is appointed by the court, will distribute the 25% to all your Credit Providers prorate.
Once this process is completed you can apply for rehabilitation to become credit worthy again. It can take 24-48 months for this to occur.
Rehabilitation is a legal process which declares you solvent and credit worthy again.
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Don't Let Debt get the Better of You
The first step towards regaining control of your finances is recognising that your financial issues are unmanageable and that you need experienced help. We provide every Credit Solution available in SA and so with more options to choose from, you can truly make the best decision for your personal situation.
Don't allow your debt to pile up any further. Schedule an appointment today or complete an Online Application. Negociate Credit Solutions is ready and waiting to assist you in getting out of your current financial situation and back on track.