Unmanageable debt (or insolvency) means that you cannot pay your debts when they fall due. It often means that your debt payments take up a large portion of your income.

Unmanageable debt does not mean you have to go bankrupt. Many people make repayment arrangements and work their way back to their debt being manageable and the repaid. Some people do go bankrupt as this is the best option for them.

Important: Speak to a financial counsellor before you do anything

The most important step you can take is to seek support and advice from a free financial counsellor to help you work out the best plan for you. Bankruptcy, Temporary Debt Protection and Part IX (Part 9) Debt Agreements all have serious consequences and should only be considered as a last resort.

Some options to consider to avoid bankruptcy

1. Make affordable repayment arrangements. Repayment arrangements can be short term, medium term or long term. Creditors are often very willing to work with you so you can repay your debts.
2. Make reduced lump sum offers in full and final settlement. Sometimes you get a lump sum or your family or a friend is willing to help. In those cases, you can offer to settle for a reduced amount in full and final settlement.
3. Ask your creditor about reducing (or not charging) fees or interest. This can sometimes make the repayment arrangement affordable.

Whatever option you consider a financial counsellor can give you advice on how to do it.

Bankruptcy and other insolvency options

Under the Bankruptcy Act, there are options available if you have unmanageable debt. All of the options listed below are an act of bankruptcy.

The options are:

• Bankruptcy

Bankruptcy is the formal process of you declaring (or being declared by a court) that you are unable to pay your debts. For further details see Bankruptcy.

• Temporary Debt Protection

This is very limited protection for 21 days. It only protects you from the Sheriff seizing your goods and/or the court garnisheeing (taking) your wages or money in your savings account. See Temporary Debt Protection.

• Part IX (Part 9) Debt agreements

A Debt Agreement is a formal alternative to bankruptcy where all your creditors agree to accept part payment of the debts in equal proportions. You must be unable to pay your debts in full to be eligible for this agreement. See Part IX Debt Agreements.