Don’t Sign Your Life Away, be Wary of Debt Deals

1. Don’t Sign Your Life Away, be Wary of Debt Deals As more people are experiencing Mortgage arrears and Credit arrears, debt agreements are being struck across Australia, the Debt agreement companies have been slammed by Australia’s largest consumer law practice and financial experts for misleading claims & marketing tactics .

2. Also with debt consolidation responses as well, the analysis of the internet & website marketing of the debt agreement companies found that the industry was rife with misleading, exaggerated or false claims. Analysis of the internet & website marketing of the debt agreement companies found the industry rife with misleading, exaggerated or false claims.

3. PRESSURE RISING – More debt agreements are being struck across Australia It is expected to be a record breaking year for these debt agreements as thousands of Australians signs up with the trend of over 10 % more for the 9 months to 31st March 2013 and according to Government statistics we are heading to over 10,000 debt agreements in a full year. 

4. The Consumer Action Law Centre chief – Gerard Brody was quoted “ People facing unmanageable debt are particularly vulnerable , are looking for hope , but giving them unrealistic expectations is not the answer “  They need Hope, Support and Solutions

5. Many of these Companies understated what were the serious consequences of debt agreements, these actually were similar in effect to full bankruptcy as both forms of insolvency are listed on the individual’s credit report for 7 years and for some , entering into a debt agreement can be financially worse than going bankrupt . Often they are at their lowest ebb when they go to these businesses for advice, so it is imperative that they are given clear and more importantly, realistic advice .

6. It is apparent that consumers are confused about the true role of debt agreements and many people sign up without realising the consequences, and it is clear that they do not properly understand the future consequences.  They often confuse them as being a Debt Consolidation Loan, and later when it is apparent that they can’t afford to pay them they end up becoming bankrupt anyway. 

7. There have been many problems with debt agreements since they were introduced in 1996, and it should be understood that there are many options when overwhelmed by debt – a debt agreement is only one of them. The most obvious of these options are : * Negotiation of hardship arrangements with Creditors * Debt negotiation and consolidation * Bankruptcy 

8. Financial counsellors & Debt negotiators would recommend for many people that these as being more beneficial than a debt agreement , in particular for people on low income with no assets then bankruptcy is a better option, and debt agreements should be seen as a last resort . Some marketing can be misleading if it only highlights the benefits, but doesn’t tell of the severe consequences – which are similar to bankruptcy. So it is critical to get independent advice .

9. In recommending a debt agreement it is obvious that there can be a conflict of interest ,as there are Fees to set up & manage this , so there is a reward , perhaps seen to be preferable to advising other options which do not generate any revenue for them , but could be better financially for the client. Most independent advisers avoid debt agreements 99 % of the time and seek to help people manage their way out of debt without legally binding agreements which may have severe future consequences.

10. Debt agreements have their place, but in most cases can be avoided. The major points in this analysis were – i.   HIGHLIGHTING -negative effects of bankruptcy ii. DOWNPLAYING – negative effects of debt agreements iii. IMPLYING – debt agreement administrators were balanced iv. BEING – extremely optimistic about the level of debt forgiveness possible with an agreement v.  IMPLYING – agreements were endorsed by the Government vi. IMPLYING – agreements offered ‘Financial freedom

11. It is important that consumers should be made aware of the full implications of debt arrangements and thoroughly investigate all their options, including expert financial advice when faced with serious level of debt as there are several alternative options available. 

12. DEBT AGREEMENTS - What is a debt agreement? ·  It is a legally binding agreement between you and your creditors ·  You offer to pay instalments or a lump sum that is often less than the fill amount owed ‘ All creditors receive the same % rate with the agreement must be accepted by a majority of creditors ·   A debt agreement is ‘ an act of Bankruptcy’ and you are only released from most debts when all payments included in the agreement are made  Debt agreements are lodged with the Insolvency Trustee Service Australia by anyone who is a registered debt agreement administrator . Fees are charged by ITSA and the administrator.

13. WHAT ARE THE CONSEQUENCES? ·  Your name & other details are permanently appear on the National Personal Insolvency Index , which is a public record          Your ability to obtain further credit is affected and it can be included in a credit agency record for up to 7 years ·  Unsecured creditors cannot take any further action against you as you are released from unsecured debts when all payments under the agreement are made ·  Secured creditors ( such as mortgages ) can still seize and sell any asset offered as security against that debt.