Are You Insolvent?
Are you in a position where your credit card balances are always increasing, despite earning good money, and you don’t understand why? When unexpected expenses come up, you may use credit cards, which just makes your financial problems worse. Are you thinking about debt consolidation or borrowing your way out of trouble? Before you borrow more money, you need to ask a couple of basic questions: “Can I afford my current debts?” and “How much can I actually afford to repay?”
Most people trust the bank to assess if they can afford a requested loan. Insolvency simply means that your income is less than your expenses.
Being insolvent is an increasingly large problem. Banks routinely offer to increase credit limits, people borrow their way out of difficulty through debt consolidation and mortgage refinancing, the cost of living has risen substantially and incomes have gone down due to the global recession. The bottom line, however, is this: if you can’t afford your current financial commitments, then borrowing more money is just “rearranging the deck chairs on the Titanic”.
If your expenses are more than your current income, then debt consolidation is not an appropriate solution. It won’t address the basic problem that you can’t afford the debt; at best, it will delay the inevitable. The Commonwealth Government has legislated two solutions for people in your situation: Debt Agreements and Part 10 Personal Insolvency Agreements. These possible solutions allow for you to only repay a portion of what you owe based on how much income you have left AFTER your expenses.