Debt Agreements – a Debt Settlement Solution

The formal name for a debt agreement is a ‘Part IX Debt Agreement’.

In its most simple terms, a debt agreement is a debt settlement arrangement made between yourself and your creditors to settle your debts affordable. If a majority of your creditors (in value) agree to your settlement offer, interest is frozen and your affected creditors will not be able to take any fresh steps against you to recover their debts. Naturally there are consequences for those debtors wishing to propose a debt agreement and it should never be confused with a loan.

We are specialists in the preparation of debt agreements for Australians looking to avoid bankruptcy by taking advantage of laws designed to help people avoid the serious consequences of bankruptcy and settle their debts within a reasonable time frame, affordable.

We are a Registered Debt Administrator.

As a registered administrator of Part IX Debt Agreements, you contact us today on 02 9798 1580 or fill out an enquiry form to the right and a consultant will contact you shortly to organise your debt agreement and to prepare it for lodgement with the Insolvency and Trustee Service Australia (ITSA).

Australian Financial Security Authority (AFSA)

AFSA Regulation is responsible for regulating insolvency practitioners including debt agreement administrators in order to ensure high national standards of personal insolvency practice and procedure.

A debt agreement is an option available for debtors to deal with unmanageable debts and a flexible alternative to bankruptcy.

A debt agreement can only be entered if the debtor is insolvent, which means someone who is unable to pay his/her debts as and when they fall due.

A debt agreement can be entered if a debtor has;

  • Not filed for bankruptcy, utilised a debt agreement or given an authority under section 188 of the Bankruptcy Act in the last 10 years;
  • An after tax income of less than $73,259.55;
  • Unsecured debts of less than $97,679.40 (an unsecured debt is any debt that is not secured against an asset, e.g. property).

Learn more about who can enter a debt agreement.

How to Apply for a Debt Agreement

To assess your suitability for a debt agreement is call and speak with one of our debt consolidation consultants on 02 9798 1580

Once the debt agreement proposal is drafted your creditors will then have the chance to vote upon. It is accepted if a majority of creditors in value (of the debt) vote in favour of the debt proposal.

Is a Debt Agreement the Same As Bankruptcy?

No – it is a an alternative to bankruptcy. Although a debt agreement is considered an ‘act of bankruptcy’, it is very different to bankruptcy. The following table illustrates the differences:

Eligibility

Bankruptcy Debt agreement
Australian connection Must have a residential or business connection. No residential or business connection required.
Previous insolvency While previous insolvency does not by itself make a person ineligible, the Official Receiver may not accept the petition if the debtor was previously bankrupt and some other conditions are met. Must not have been a bankrupt, proposed a personal insolvency agreement or made a debt agreement in the previous 10 years.
Income threshold No Yes
Asset threshold No Yes
Debt threshold No Yes

Income, employment and trade

Bankruptcy Debt agreement
Payments from income required? Yes, mandatory payments required if income exceeds a statutory threshold. Yes, if the terms of the agreement require payments from income – this occurs in most cases.
Ability to continue to operate a business It depends on the nature of the business and if the trustee sells the business assets. Key points include:
  • When a partner becomes bankrupt it dissolves an existing partnership
  • If trading under a business or assumed name after the date of bankruptcy, a bankrupt must disclose their bankruptcy to people dealing with the business. This includes bankrupts trading alone or jointly.

Yes, unless terms of the agreement provide otherwise. If trading under a business name or assumed name (whether alone or in partnership) the debt agreement must be disclosed to all people dealing with the business.Ability to be a director of, or otherwise manage, a corporationNoYesOther employment restrictionsProfessional bodies and/or trade associations may have certain conditions of membership for the duration of the bankruptcy. There may be restrictions on holding some statutory positions during the period of bankruptcy.Professional bodies and/or trade associations may have certain conditions of membership for the duration of the agreement. There may be restrictions on holding some statutory positions during the period of the agreement.

Assets

Bankruptcy Debt agreements
Ability to retain assets No, unless it is exempt property (for example, household furniture, tools of trade up to a certain value). Yes, unless terms of the agreement provide otherwise.
Ability to retain assets acquired during the period of the agreement/bankruptcy No, unless property being acquired is exempt property. Yes
Can assets previously sold or transferred for less than market value be recovered? Yes, subject to certain statutory conditions being met. No
Can payments made to creditors prior to the agreement/bankruptcy be recovered? Yes, subject to certain statutory conditions being met. No

Debts

Bankruptcy Debt agreements
Unsecured debts Unsecured creditors receive pro rata payment from funds recovered by the trustee after fees and costs have been deducted. There are some statutory priority payments to particular classes of creditors like employees. All unsecured creditors receive pro rata payments.
Secured debts Rights of secured creditors are not affected. They can repossess asset if there is default in payment. Rights of secured creditors are not affected. They can repossess asset if there is default in payment.
Release from debts Upon discharge from bankruptcy, but not released from some types of debts. Upon completing terms of agreement, but not released from some types of debts.

Restrictions

Bankruptcy Debt agreements
Ability to travel overseas Prior consent of trustee required. No statutory restriction.
Ability to travel within Australia No statutory restriction. No statutory restriction.
Incurring further debt Must disclose insolvency if incurring debt or obtaining goods and services in excess of a threshold. Must disclose the debt agreement if incurring debt or obtaining goods and services in excess of a threshold.

Fees and charges

Bankruptcy Debt agreements
Statutory filing fee No Yes
Statutory levies A government levy is imposed on all receipts in the administration. Any interest earned on these receipts is also paid to government. A government levy is imposed on all receipts in the administration. Any interest earned on these receipts is also paid to government.
Fees for administration of the estate/s Subject to creditor approval. Fees can be reviewed upon application to the Inspector-General. Subject to creditor approval.

How We Can Help
Thousands of Australians each year are opting for a debt agreement as a means to deal with their unmanageable debt. This website has a wide range of useful information about debt agreements and debt settlement strategies, including: how debt agreements works; who can enter a debt agreement; how a debt agreement can help; benefits; how to apply and what debts qualify. Our trained debt consolidation consultants are available on 02 9798 1580 to provide you with further assistance and to assess your finances.

A Debt Agreement is not for everyone and you need to be certain it’s the right choice for you. To help with this important decision, you should speak only to a trained expert.

The advantages of a debt agreement are:

  • All interest and charges on your unsecured debts will be frozen.
  • Providing you keep to the terms of your arrangement, your creditors will not be able to pursue any further court action. They will also be prohibited from sending letters to you and telephoning you for the purpose of debt collection.
  • Once a debt agreement is successfully completed your debts are effectively settled, providing you with a fresh start.
  • For anyone who does not wish to go bankrupt because of their job or the stigma of bankruptcy this can be an excellent option.
  • The debt agreement will bind most unsecured creditors.
  • Your contributions are based on your ability to pay.
  • You can keep your secured assets as long as you continue to pay for them.
  • Once there is an agreement in place, the amounts owed to creditors does not change.
  • A debt agreement can be constructed to suit the debtor. For instance, it may be possible to propose a moratorium, lump sum settlement or any other arrangement that creditors may consider suitable.

The disadvantages of a debt agreement are:

  • You will be required to stick to a budget for the term of the agreement.
  • It’s a requirement that all assets and liabilities are declared.
  • By law, you must declare you are in a debt agreement if you apply for credit over $5145.00
  • Debt agreements are recorded on a public register and are likely to appear on your credit file. This is turn may affect your ability to obtain credit.
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