Most people find themselves in financial difficulty at some time in their lives. Whether it's because of too many bills arriving at the same time, the loss of a job, or just overspending, the reality is that financial difficulties can suddenly turn into a crisis. And the consequences can be devastating.

For women on low incomes who may have to support a family on their own, managing finances can be particularly difficult. At times it may even seem impossible to make ends meet or see a way out of the money mire. But there are practical things you can do, and people who can assist you if you get into a situation you don't know how to control.

And the reality...

• Anyone can experience financial difficulties and fall into debt.
• Read all documents thoroughly. Seek legal advice before signing up for or guaranteeing loans, especially if they are for someone else's benefit. Even if you totally trust your partner, it is always wise to seek independent advice.
• If you have joint debts, you each owe the whole amount.
• If you're in a better position to pay, or are easier to find, you're more likely to be chased for debts owing ­ even if the Family Court has ordered your partner to pay them.
• Your credit record will contain details of your bankruptcy, even after it has been discharged.
• Bankruptcy is a last resort which can have long term consequences.

What is sexually transmitted debt?

The National Credit Code states that every attempt must be made to redeem the money owed by the borrower before pursuing the guarantor. But the reality is that if you have more assets than your partner, earn more money, or are easier to find, you're more likely to be chased for debts owing. As a co-borrower, you may find yourself solely responsible for a debt from which you have received no benefit.

Is there any way to avoid contracting sexually transmitted debt?

• Make sure joint assets are purchased in both yours, and your partner's names.
• Make sure joint debts are in both names (not only your's).
• Get legal advice before guaranteeing a loan for your partner and before signing your name to a loan which will only benefit him.
• Always read documents thoroughly and seek legal advice before signing any contracts or guarantee statements.

When is credit card debt a problem?

Ask yourself these questions

• Do you only ever pay off the minimum balance on your credit cards?
• Do you need to use your credit card to pay for essential items like food, telephone, gas, electricity, rent or mortgage repayments?
• Do you use more than one credit card?
• Do you use cash advances on one credit card to pay off others?

If you answered `yes' to these questions, you could be in danger of accumulating debts you'll find hard to repay, and may find it helpful to talk to a financial counsellor.

Is it possible to gamble without getting into debt?

If you enjoy occasional gambling, and want to keep it that way, you need to stick to a few strict, self-imposed guidelines.

• Allocate a certain amount of money from each pay, and never exceed it.
• Take the money you've planned to spend in cash. When it's run out, don't borrow from someone else, and never use an ATM to get more.
• Wear a watch at the casino or at the pokies, specify a time limit for your visit, and never stay longer than you planned.
• Never stop off to gamble if you're minding children.

What should I do if my debts become overwhelming?

The ultimate aim of a financial counsellor is to enable you to gain the knowledge and power you need to manage your own financial affairs. They can explain where you stand legally, what creditors can and cannot do, how to rearrange your debt repayments, explain how bankruptcy works and, if necessary, put you in touch with legal advisers or legal aid.

Why do people say that bankruptcy should be the last resort?

What are the disadvantages of bankruptcy?

• You lose control of your financial situation ­ a trustee will be appointed to oversee your affairs.
• You can only keep necessary household goods and a car to the value of $5000
• If you own a house or are paying one off, the title will be transferred to your trustee and the property sold off to pay your creditors.
• Renting will be difficult because real estates agents may be reluctant to recommend to a landlord that a bankrupt be accepted as a tenant.
• You can only travel overseas with the permission of the Federal Court or your trustee.
• You can't manage a company.
• Gaining employment may become more difficult.
• You may find it difficult to borrow money.

Are there any alternatives to bankruptcy?

If your financial situation has become so desperate that you are considering bankruptcy, you should definitely seek the advice of a financial counsellor who will be able to explain the alternatives. These include making an informal arrangement with the people you owe money to, organising a debt agreement under Part IX of the Bankruptcy Act, or entering a formal agreement under Part X of the Bankruptcy Act.

How can I build financial indepenance?

However, there are some general guidelines you could consider if you want to improve your financial situation.

• Prepare a realistic money plan that sets out all the things you spend money on including necessities (like rent, school expenses, gas and electricity etc), and what you spend on entertainment (including cigarettes, alcohol, etc).
• Draw up a budget that takes your income and spending into account, and sets out for you to spend less than you earn.
• Save small amounts wherever you can by putting money aside, paying your mortgage or credit cards more often, watching out for bargains, etc.

These are just some ways to save money and maximise your finances. If you're interested in finding out about establishing money plans and budgets in more detail, talk to a financial counsellor. Or if you're in a position to invest money, it might be worth while considering getting professional advice from a financial adviser, or as they are sometimes called, a financial planner.

How should I go about choosing a financial adviser?

Before choosing a financial adviser, you need to make sure that they:

• Hold an appropriate licence and belong to a professional association
• Have had a successful track record for at least five years
• Recommend a wide range of investments
• Have professional indemnity insurance and are covered by an independent complaints handling scheme.

Also, and probably most importantly, before you decide on who you want to assist you with financial advice, find out how much they charge and how they charge fees (commission-based, portfolio-based, or fee-for-service). Then invest only when you are sure you are comfortable with the investments being recommended, that you understand them, and that they suit your needs.

Getting legal advice

For information about your legal options see WIRE information sheet Getting Legal Advice.

Where do I go for help?

• WIRE
  
• Financial counsellors
  
• Financial advisers
  
• Baycorp Advantage
  
• Credit Helpline
  
• Women's Legal Service
  
• Home Finance Customer Service Centre
  
• Credit Union Service Corporation (Australia)
  
• Australian Competition & Consumer Commission Welfare Rights Unit
  

Contact WIRE

References

The production of these sheets was made possible with a grant from the Law Foundation. Every effort has been made to ensure the information contained in this sheet is accurate and current at the time of printing. However, no responsibility will be taken for the accuracy or reliability of the information, or for any loss which may arise from errors, omissions, or changes to government policy or the law.