Australians are amassing record levels of debt on credit cards. Families struggling to make ends meet are paying utility bills and school fees with credit cards and struggling with interest repayments. While many others are turning to debt agreements in order to avoid bankruptcy.

Statistics released by the Australian Financial Security Authority on Monday show that the low-cost alternative to bankruptcy – debt agreements – has hit its highest level ever.

In 2014-15 these agreements rose by a whopping 1.9 per cent to almost 3000.

Prushka’s general manager, Lyston Thayer, warned that debt agreements should be a “last resort.

“It goes on your file and can have an impact on obtaining finance in the future.

“People most commonly use them for credit card debts or when they can’t pay vet bills, childcare fees or tuition and utility and telco costs.”

Those entering a debt agreement have stringent limits put on them: They cannot earn after-tax income in excess of $80,480.40, nor may they have unsecured debts exceeding $107,307.20.

The agreements can sometimes be flexible, but more often require lump-sum payments or periodic payments..

Fiona Guthrie, chief executive of Financial Counselling Australia, said there were much better options than debt agreements.

“If you don’t comply with a debt agreement your creditors can move to bankruptcy.

“I would urge people to get independent advice about whether it’s thr right option for them and seek to pursue other options such as hardship arrangements with their creditors.”

The data released on Monday also revealed that bankruptcies had climbed in the June quarter. Bankruptcies ballooned by a staggering 9.3 per cent when compared to the same quarter in 2013/14. Overall, however, bankruptcies fell by 7.7 per cent and personal insolvency agreements grew by 2.9 per cent.

Debtors, however, are protected by laws issued in 2010 raising the minimum amount for which a creditor can issue a bankruptcy notice. The minimum amount is now $5000 (up from $2000).

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