Debt Agreement

Debt agreements are not for everyone. They are a fantastic debt solution for people who are struggling with their current unsecured debts. When we talk about unsecured debts we are referring to credit cards, unpaid invoices for services provided, store cards, personal loans etc.

These debts are not secured by any assets, however their non payment may result in the individual being forced into bankruptcy. A Part 9 Debt Agreement offers an individual struggling with debts an alternative to needing to declare bankruptcy.

 How Debt Agreements Work?

You can use the services of a professional debt agreement administrator to help you complete a statement of assets and debts and submit an agreement proposal to your creditors. This will essentially be used to demonstrate to your creditors that given your income, assets and debts you are unable to afford debt repayments at their current levels. The debt agreement will be seeking a reduction n either the overall amount that your creditors accept in full payment of your obligations, or a reduction in your periodic debt payments or both. If majority of your creditors accept your proposal, all creditors will be required to abide by it.

Criteria for entering into a debt agreement

 Advantages of a Part 9 Debt Agreement

– All unsecured creditors are bound by the agreement and can not continue to pursue you for the balance of your outstanding debts- ie. your obligations will now be lower than before entering the debt agreement.

  •  Interest stops from accruing on your outstanding debts;
  • You only need to make one payment to the debt agreement trustee instead of many;
  • Payments are set in line with your income and other obligations – therefore some of your
    previous financial stresses are removed;
  • You avoid the restrictions of declaring bankruptcy;
  • You come out of a debt agreement completely debt free;

 Disadvantages of a Part 9 Debt Agreement

  •  Your secured debts are not included in your debt agreement. Therefore if you stop paying your car loan or your home loan these assets could still be repossessed and sold. Your debt agreement will not cover secured debts.
  •  Details of your debt agreement are reflected on your credit report and may affect your ability to qualify for finance during as well as after discharge from the debt agreement.
  • Your name and some personal details will be recorded on a national Commonwealth Government data base of insolvencies in Australia. It will remain on this database indefinitely
  • Your petition for a debt agreement may not necessarily be accepted by your creditors. If it is not you may still need to declare bankruptcy

  Debts Agreements – what are they?

If you have unsecured debts (such as credit cards, personal loans, store cards etc.) which you can’t pay, you may need to consider a Debt Agreement.

A Debt Agreement is an alternative to Bankruptcy. To qualify for a Debt Agreement in Australia you need to have at least $8,000 in unsecured debts owed to more than one creditor.

A Debt Agreement is a legally binding agreement with your creditors where your outstanding debts to your creditors are negotiated down and a reduced repayment amount is implemented in line with what you find affordable.

For a Debt Agreement to be valid it must be approved formally by your creditors. We can assist with putting together a proposal to your creditors setting out reduced payment amounts and outstanding balances. Most creditors understand that if they decline your proposal you may declare bankruptcy and they could lose a lot more than the loss they will incur through the Debt Agreement.

In most cases we recommend a Debt Agreement over a three to five year period.   Once approved by your creditors, a Debt Agreement will protect you against any further legal action by your creditors with respect to the original debt.

With a Debt Agreement, you agree with your creditors what you’ll pay out your debt over the term of your agreement.