What is Australian debt relief, and what can you get from it?

The Australian financial sector takes debt collection very seriously, but they also understand that debt relief solution options are necessary if you can’t afford to pay off your debt. Read on to discover more about debt relief in Australia.

Let us get to the following commonly asked Australian debt relief questions:

• What is the best debt relief program out there?
• What is the Australian debt relief program?
• Does the government offer debt relief?
• How do I wipe my debt clean?
• Can you go to jail for debt in Australia?
• Should you settle your debt or pay it in full?
• How does a debt relief program affect a credit score?

Q1. What is the best debt relief program out there?

Your best debt relief solution depends on numerous variables. 

First, it depends on your financial situation. If you are in financial hardship, you will want to find a debt solution with an excellent debt management plan.

Next, you should focus on the type of debt you primarily have (a car loan, tax debts, a personal loan, payday loans, a home loan or health insurance debt). Some debt relief options will focus on a particular debt type, like tax debt. 

Additionally, you can find a debt solution that lowers the credit card debt you pay to your credit provider; this is useful if you use too much of your credit card balance and have a poor credit rating on your credit reports. Solving this debt can help you start credit repair and improve your credit score.

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Q2. What is the Australian debt relief program?

The Australian debt relief program can help you to consolidate your debts by starting dispute resolution and providing you with appropriate repayment plans.

A crucial part of the Australian debt relief program is to help you devise debt agreements to arrange a fair loan repayment plan (or repayment plans for any debt type). If you want to double-check the repayments, you can use a loan calculator.

Ultimately, the debt relief program can offer financial freedom by removing the stress of large debt amounts (similar to mortgage stress).

Q3. Does the government offer debt relief?

The government offers several debt solutions for those facing financial difficulty, including:

• Debt Relief Orders (DROs) that wipe your debt from your record. However, they often result in bad credit because they appear on your credit file.
• Individual Voluntary Arrangements (IVAs) are a great way of dealing with debt collectors because they consist of an agreement you make with a debt collector to result in smaller debt payments.
• The government can offer avenues to talk to financial advisers or financial counsellors; they can provide you with legal advice and tips on managing debt.

Q4. How do I wipe my debt clean?

A debt relief order (DRO) wipes your debt clean from your record. However, they often result in bad credit because they appear on your credit file.

Note: Another option to clear your debt is to consider personal insolvency agreements, which are handy because they transfer the responsibility of your debt to a trustee.

Q5. Can you go to jail for debt in Australia?

Debt on its own cannot put you in jail in Australia; this remains the case if you commit a crime like tax avoidance because you may go to jail for the crime you commit, but you will not receive jail time for the levels of debt that you owe.

However, if you have unmanageable debts or unsecured debt and still need to pay a creditor, that creditor can sue you, resulting in your filing for bankruptcy.

Q6. Should you settle your debt or pay it in full?

You should always aim to pay in full rather than enter into debt negotiation and settle. If you negotiate the payment options available, it can result in you paying less debt. However, settling your debt will impact your credit score, meaning you must repair it.

However, if you don’t mind having to fix your credit, settling a debt can be a crucial way to avoid filing for bankruptcy.

Q7. How does a debt relief program affect a credit score?

Using a debt relief program can result in a negative credit score, reducing your chances of receiving the credit from specific lenders (mobile phone direct debit contract lenders, home loan lenders for living expenses, etc.).

Remember to save money to prevent yourself from using a debt relief program.

Note: Financial counselling can be beneficial to understanding how a debt relief program can affect your credit score.

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In summary

Australia has numerous debt relief options, including debt consolidation loans, debt relief orders and more.

If you can’t manage your debt, you should contact the National Debt Helpline, which can explain the government benefits for debtors more clearly (open Monday to Friday).

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Disclaimer: The author is not a financial advisor and the information provided is general in nature and was prepared for information purposes only. This article should not be considered to constitute financial advice. Accordingly, reliance should not be placed on this article as the basis for making an investment, financial or other decision. This information does not take into account your investment objectives, particular needs, or financial situation.

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