Get Debt Free | Bankruptcy | Debt Consolidation | Specialist

Secured loans

A secured loan is debt which is secured by property. Most common types of property taken as security is real estate, motor vehicles, boats, caravans etc,  however other assets can also be taken as security to back the loan. Security can also be referred to as “collateral”. Once you have provided an asset as collateral the lender will usually register its security and you will not be able to provide (or pledge) this asset as collateral for any other loan.

What this means is that if you fail to repay the loan (as agreed with the lender), the lender can repossess the security and sell it.  This type of action is commonly referred to as a “repossession” or a “foreclosure”.

There are many reasons why lenders insist on taking security for a loan.  The most common reason is that it protects the lender against the risk of default.  If the lender has taken good security then it reduces the risk of losing money in the event of default.  If the lender can reduce its risk of default it will usually offer a reduced rate of interest. The time period for secured loans tend to be longer given less risk is involved.

Unsecured loans

An unsecured loan refers to debt which is not secured against any property.  This means that if you fail to repay an unsecured loan the lender cannot repossess an asset in the event of you defaulting on the loan.  However, if you fail to pay an unsecured loan and you owe the lender more than $5,000 (current as at March 2012) then the lender could force you into bankruptcy by an order of the court.  This process is much more complicated and costly for a lender and as such lenders tend to charge higher interest rates to protect themselves against this additional risk. The time period for unsecured loans also tend to be shorter given the high risks involved.

John is a key account Manager in sales and spends most of his time on the road and earns $52,000 per year.  John recently broke up with his life partner which was unexpected.  He and his partner obtained credit to purchase furniture and other household items, but when they broke up John was left with all the debt as the credit cards and personal loans were in his name. Not only did John have to deal with the break up but he also had to deal with the debts his partner left behind.

John found out quickly he could not cope with his commitments and the debts started to fall into arrears.  The creditors were ringing him every day and were hounding him for money.  John now suffers from depression and needs medication to cope with his anxiety.  John went to his local bank and applied for a consolidation loan but it was refused.  He was refused as his debts were in arrears. He spoke with a friend of his with whom he confided and his friend suggested he call Get Debt Free to find a solution.

John’s debts totaled $49,471 and his minimum monthly repayments were $1,009 per month. In the Debt Agreement Proposal John offered to pay $338 per fortnight for 130 fortnights (5 Years) to his creditors. This represented a reduction of his monthly payments in the amount of $276.  In total John’s creditors would receive $33,006.64 making the return to creditors 65 cents in the dollar as full and final settlement of his debts.  The creditors voted on his proposal and it was later accepted.  Once John has finished his obligations under the Debt Agreement he will become Debt Free.

If you would like to find out more about a Debt Agreement contact us on 1800 677 551 or apply on-line for an instant preliminary assessment.

Meryl is a single woman employed as a Packing Manager who was struggling with her personal loan, credit card and secured car loan for more than 12 months before contacting Debt Free for help. Meryl was earning $80,000 p.a. which she felt was enough to repay her debts . Meryl’s troubles began when the cost of living went up and her salary remained the same. Meryl was struggling with her every day bills and household shopping and some days Meryl sacrificed eating for keeping money to one side to repay debt.

Meryl informed us that every month she would put most of her pay onto her credit cards and only lived off a small percentage of her income. By the end of the month Meryl found herself drawing ‘cash advances’ from her credit card to buy food.  What Meryl didn’t realise is that the ‘cash advances’ attracted a very high interest rate and her efforts were being quickly eroded. Meryl found herself in a vicious cycle of debt which she could no longer control or face on a day to day basis.

Meryl’s accounts fell into arrears and a black mark was placed against her credit file. Meryl applied for a consolidation loan, however, it was refused by her bank as her accounts had fallen into arrears and her credit file had a black mark against it for late payments. Her bank advised her to re-apply after six months if she had cleared her arrears but this is something which Meryl could not achieve.

Meryl’s felt she needed professional help particularly after creditors started to threaten legal action.

After contacting Debt Free, we worked out a sustainable budget for Meryl and established that she could only afford to repay $1,560 per month.  This compared to her current monthly minimum repayments of $2,404.80 per month which seh was trying to make.  We recommended to Meryl that she should offer the amount of $1,560 per month or $720 per fortnight to her creditors. This represented an offer of 70 cents in the dollar in full over 4 years which in our experience was an acceptable offer to creditors.The 30 cents in the dollar will be legally written off or settled after completing the Debt Agreement.

Debt Free assisted Meryl with preparing a formal Debt Agreement Proposal and her creditors accepted it after approximately 35 days and it then became legally binding on all parties. This meant that Meryl was now protected by the Debt Agreement and no creditor could take any enforcement action at all.  In fact  Meryl’s creditors must now contact Debt Free and Meryl can get in with her life.

If you would like to find out more about a Debt Agreement contact us on 1800 98 10 70 or apply online for a free preliminary assessment.

The 1st step in setting up a Debt Agreement – establish if you are eligible

The first task an experienced Registered Debt Agreement Administrator will do is to discuss with you your debt levels, the type of debt you have (either secured or unsecured debt), your income and your assets. The reason for these initial questions is that the debt agreement administrator must first establish if you are eligible for a debt agreement.  To be eligible for a debt agreement your debt, income and assets must be under the statutory thresholds as set by ITSA.  To see if your debt, income and asset levels are below the statutory thresholds click here.   If your debt, income and assets exceed these statutory thresholds, then you may need to consider a Personal Insolvency Agreement – click here to learn more about a Personal Insolvency Agreement.

When establishing your debt levels, only unsecured debt is taken into account.  So if you have a car lease or a house mortgage (ie a loan secured against property) then that debt is excluded when tallying your total debt for the purposes of the debt threshold limit)

The 2nd step in setting up a Debt Agreement – working out your budget

The 2nd task is to work out a budget for your household to establish how much uncommitted income (ie income left over after household  expenses) can be offered to your creditors.  Once we work out your uncommitted income we can then estimate a dividend for your creditors.  Given Debt Free has been setting up and administering debt agreements since 2006 we have a very good idea on what your creditors will accept as a dividend.  Not every creditors will accept the same dividend so setting up a debt agreement must be done on a case by case basis. If we don’t feel your creditors will accept the dividend you can offer then we will advise you before-hand so you can decide if you wish to proceed with trying to set up a debt agreement or you may wish to consider another service like bankruptcy. Our advice is not to start paying any set up fees until you have established your budget and agreed the uncommitted income to paid into your debt agreement.

The 3rd step in setting up a Debt Agreement – prepare for proposal for ITSA

Only after we have worked out your estimated dividend and we feel (from our experience) that your agreement has a good chance of being accepted by your creditors that we will start to collect set up fees.
Once we have collected some set up fees we will then prepare your debt agreement proposal to be lodged with ITSA. Typically we will start preparing your debt agreement proposal after we have collected set up fees for approximately 4 weeks.

The 4th step in setting up a Debt Agreement – lodge your proposal with ITSA

Once your debt agreement proposal has been lodged and accepted for processing by ITSA your creditors cannot continue to call you.  ITSA can take up to a week to process your agreement.  Once ITSA has accepted it for processing it will be sent to your creditors for voting.  At least 50% (calculated in value) of your creditors will need to vote in favour of the agreement. If your proposal is accepted by creditors it will then become legally binding on all parties and you will be obliged to make the payments as agreed (ie pay your uncommitted income into the debt agreement).

The 5th step in setting up a Debt Agreement – the administrator to supervise your agreement

Once accepted by your creditors your debt agreement administrator will start collecting the payments you agreed to make and the administrator will work to ensure that your obligations under the agreement are then meet with each of your creditors individually.
Since you debt agreement administrator will be with you throughout the entire term of debt agreement, you need to choose an administrator that is professional and trustworthy.  At Debt Free we have been helping people get out of debt since 2006, so you can be assured we will still be around to help you conclude your debt agreement.

The best way to understand what we can do as a debt agreement administrator and if this is the right debt solution for you is to call us today on our toll free line 1800 98 10 70

All calls to us are free of charge (from anywhere in Australia) unless you call from a mobile phone. If you call from a mobile phone you will be charged the cost of a normal call.