Join our mailing list to stay informed!
Posted by Revive Financial on Mar 10, 2023 12:15:00 PM

6 Strategies to Manage Overwhelming Debts

Struggling to pay your bills or make your loan or credit card repayments is a scary position to be in, especially if you have a family relying on you.

Whether it’s the result of poor money management or you’ve been affected by unemployment, ill health or a relationship breakdown, the feeling of hopelessness as debts roll into yet more dollars can be overwhelming.

The worst thing you can do in this situation is ignore it and hope it will go away – this will only make things worse. Instead, you need to take action now. Here are your options.

1. Talk to Your Creditors

The most sensible first step if you’re struggling to keep up with repayments on your credit cards or loans (including your home loan) is to let your creditors know.

Not only will they appreciate your honesty, they may also cut you some slack by holding off on calling in the debt collectors and negotiating with you on payment terms.

If you can’t come to an agreement ask for a review. Still not happy? Make a complaint to the Australian Financial Complaints Authority (AFCA).

2. Request Hardship Assistance

Under Australian consumer credit law, providers of personal and household finance, including mortgages, car loans, personal loans and credit cards, are required to consider hardship variations (flexible payment arrangements) if you’re experiencing financial difficulty. The same applies to debt collectors attempting recovery action.

The main types of variation available include:

  • A reduction of your payments to a more affordable level and a subsequent extension on your loan term
  • A short term stop on payments and subsequent extension on your loan
  • A short term stop on payments after which you catch up on missed payments

To qualify, you must be experiencing verifiable financial hardship due to a sudden drop in income or a dramatic increase in expenses.

3. Don’t Pay (when the debt is in dispute)

Although we said ignoring your debt is the worst thing you can do, if there are disputes on any of your debts or other reasons behind your non-payment, you can legitimately opt not to pay and see what happens.

This is because you can only legally be pursued for a debt if in the previous six years you have:

  • Incurred the debt
  • Confirmed in writing that you are liable for the debt
  • Made payments towards the debt

After this time it becomes ‘statue barred’ and no legal action can be taken against you.

4. Negotiate an Informal Arrangement

If you only have a handful of creditors, and can access funds now or over time to pay a portion of your debts, proposing an informal arrangement may be your ideal solution.

If successful, informal arrangements help you avoid a debt agreement or bankruptcy. You therefore avoid the restrictions of these allowing you to retain any company directorships you hold, as well as protect important assets like the family home. It also means that the process is not recorded on the National Personal Insolvency Index or your credit record. Your circumstances are confidential and there is no public record of your arrangements.

Informal arrangements require each of your creditors to separately accept your proposal. They are therefore more attractive where you can offer an up-front payment to your creditors, and if required, further payments over time to improve the return.

It’s important to note the ATO does not accept less than full payment of its debt unless a formal insolvency appointment is entered into. Accordingly, if you have an ATO debt you can’t pay in full, your available options will include a debt agreement, personal insolvency agreement or bankruptcy.


5. Consider a Debt Agreement or Personal Insolvency Agreement

A debt agreement is a formal, legally binding agreement between you and your creditors. Essentially, it involves you negotiating to pay a percentage of your combined debt that you can afford over time.

Repayments are made through a debt agreement administrator. Once all are fulfilled, the agreement ends and your creditors can’t recover the rest of the money you owe them.

The benefit to you is that you end up paying less, get out of debt and avoid bankruptcy and its repercussions. The benefit to your creditors is that they may receive more money than if you had become bankrupt.

Importantly, you’re only eligible to enter one if you have net debt or assets less than $114,478.00 and after-tax income no greater than $85,858.50.

A personal insolvency agreement is similar to a debt agreement, but for those who do not meet the above asset, debt or income thresholds. It has a similar effect to debt agreement, though the costs are significantly higher and you’re prevented from being a company director while subject to a personal insolvency agreement.

6. Declare Yourself Bankrupt

While bankruptcy isn’t viewed as a positive course of action, it can sometimes be the best thing to do if your debts have spiralled beyond your control.

Under voluntary bankruptcy, you are legally released from almost all of your unsecured (credit cards, personal loans) and secured (mortgage) debts. The exceptions include penalties and fines, child support payments, and university loan debts under HECS/HELP.

For some this can mean a fresh start. For others, it can make it hard to get credit, limit their employment options or cause them to lose their home. Because of this you need to think carefully before pursuing it.

However bad your financial situation is, knowing you have options, as well as what your options are, can be a welcome light at the end of a stressful debt tunnel. Ultimately, it’s only money. So don’t let it keep you up at night, just think of it as a hurdle you can overcome.

Unsure how you should deal with your out-of-control debts? Contact us today.

For more information on personal insolvency, check out our personal insolvency page here.

Topics: Bankruptcy, Personal Insolvency, Debt Agreements, Debt Consolidation, Personal Debt, Debt Management Plans

How Can We Assist You Today?

Personal Debt Icon Personal
Business Debt Icon Business
Please select an assistance option to continue.

Types Of Unsecured Debts

Credit Card Icon Credit/Store Cards
Personal Loan Icon Personal Loan
Pay Day Loan Icon Pay Day Loan
Tax Debt Icon Tax Debt
Disconnected Utilities Icon Utility Bill
Other Debts Icon Other
Please select at least one type of unsecured debt.

Your Business Structure

Sole Trader Icon Sole Trader
Partnership Icon Partnership
Company Icon Pty Ltd Company
Tax Debt Icon Trust
Please select at business structure to continue.

Unsecured Debt Amount


Business Debt Amount


Take Back Control Today!

First Name

Last Name


Phone Number

Phone number must be 10-digits long and begin with a 0. (e.g. 04 1234 5678)

Post Code

Post code must be 4-digits long (e.g. 4567)

Some of your details appear incorrect.
Please update the highlighted fields and re-submit.


You’ve taken the first step to steer your business back to viability

Let’s keep the momentum going, take the second step by linking your Xero account now.


You've taken the first step to becoming debt free

Let's keep the momentum going, take the second step now and complete the assessment form.

By submitting this form you acknowledge that you have read and accept our Privacy Policy