Debt Management Options

There are a number of contributing causes of financial stress, some of which are beyond the control of an individual and accordingly are difficult to include in a financial plan. Some of the most common contributing causes of financial stress include:

  • Breakdowns in marriage or relationships
  • Compulsive behavior and addictions
  • Medical issues
  • Poor money management
  • Business failures – Directors liabilities – Personal guarantees
  • Loss of employment or dramatic decrease in household income
  • Income tax issues
  • Education debt issues

When dealing with financial issues there are different options available which have their own unique pros and cons. The option that may best fit your situation depends on the amount of your debt, your types of debt, your amount of income and monthly expenses, and the importance of your credit rating. Some of the options that may be available include:

Refinancing debt through a Consolidation Loan or Line of Credit

Remortgaging home to make use of your equity to consolidate your debts

Home Equity Loan or Second Mortgage to consolidate your debts

Loan from Family

Budgeting to reduce household expenditures to allow for higher debt repayments – making use of a debt repayment plan

Informal proposals with creditors to agree upon a debt repayment schedule and / or lower interest rate – this is usually done on individual creditor basis, however it will result in an R7 on your credit rating

Student Loans (specific debt) – request interest relief which results in all future payments being applied against the loan principle

Credit Counseling Service – Debt Management Plan – this is undertaken by a Credit Counselor and done on informal basis – however not all debt is included (i.e. Student Loans, Income Tax, Legal Action, etc.) and results in an R7 on your credit rating

Consumer Proposal – undertaken by a Trustee through Federal Law which includes all unsecured debt, however this will results in an R7 on your credit rating

Bankruptcy – undertaken by a Trustee through Federal Law which includes all unsecured debt, however this will result in an R9 on your credit rating

This summary is not exhaustive and there may be other options available that may be unique to your specific situation. However we hope the information discussed has given you some insight into various Debt Management Options and how they may affect you.