What is a Debt Agreement?
A Debt Agreement is a legal and binding agreement between you and your creditors. It outlines a new affordable payment arrangement of your unsecured debts.
A Part 9 Debt Agreement allows you to repay only a percentage of each dollar you owe while being able to get on with your life and avoid bankruptcy.
Debt Rescue specialises in helping clients through the Debt Agreement process to reduce their stress and make their debts more affordable.
What are the Benefits of a Debt Agreement?
A Part 9 Debt Agreement was written into the Bankruptcy Act to allow people to honor their creditors, repay their debts, and avoid the harsh restrictions of Bankruptcy. Today, it is one of the most popular forms of debt relief. Assuming you adhere to the terms of your Debt Agreement, you will be able to:
Reduce the amount of your unsecured debt by only paying a percentage of each dollar you owe to your creditors.
Interest and fees on your existing unsecured debts will be frozen, so you can repay your debt faster.
Creditors and debt collectors must cease all recovery methods so those harassing calls and emails will stop.
Find solace in your Debt Agreement knowing you can pay your debts and get on with your life.
Is a Debt Agreement right for you?
A Part 9 Debt Agreement falls under Part IX of the Bankruptcy Act 1966. It is considered a form of bankruptcy however, it is very different from declaring bankruptcy itself. Entering a Part 9 Debt Agreement does not carry the same consequences of Bankruptcy.
Am I Eligible for a Part 9 Debt Agreement?
You are eligible to enter a Part 9 Debt Agreement if you have:
- not been Bankrupt or in a Part 9 Debt Agreement in the last 10 years
- income and assets less than a set amount
- an unsecured debt level less than a set amount
- trouble paying your debts when they are due (insolvent)
- Australian citizenship or a residential or business connection to Australia
If you are struggling with your debts but you don’t fit these requirements there are a number of other debt relief solutions available to you. Give one of our friendly Case Managers a call on 1800 00 3328.
Success Story: Nick's Debt Agreement
Unfortunately, Nick lost his job at the mines. After several weeks of being unemployed, Nick was successful in gaining new employment. While he was looking for work, Nick fell behind with his debt repayments. He tried to catch up once he found a new job, but it didn’t pay as well and Nick was overwhelmed by debt.
After months of struggling, he started to receive threatening letters from his creditors and he decided to call Debt Rescue for help.
After listening to Nick’s situation, we found Nick was eligible for a Part 9 Debt Agreement. Based on Nick’s new income, we proposed he could only afford to pay 60c for each dollar owed back to his creditors. His creditors voted and accepted this proposal over a 5 years agreement.
Debt Rescue was able to reduce the amount of debt Nick owed to his creditors. He was given 5 years to repay his debts in peace.
How we can help you with a Part 9 Debt Agreement
Negotiating with your creditors can be a daunting and stressful experience. We remove your financial stress while we work to resolve your debts.
Once you engage Debt Rescue, we become the authority on your debts and your creditors must speak directly with us. This puts an immediate end to those harassing phone calls while we get your solution in place.
Our Case Managers have years of knowledge and expertise, so understand the ins and outs of the process. We use this experience to get the best possible outcome for our clients.
Along with our associated companies, Debt Rescue is a Registered Debt Agreement Administrator. Our practices are compliant with the legislation as regulated by the Australian Financial Security Authority (AFSA).
How It Works
Build a Case
We will gather details of your financial situation, including your budget and extenuating circumstances, to build a proposal based on your surplus net income.
Your proposal, as agreed by you, is lodged with AFSA. AFSA forwards this to your creditors for their consideration and must vote within 35 days.
The majority of your creditors must approve the proposal for it to be accepted. Once accepted, you will begin making the repayments and breathe easy again.
Part 9 Debt Agreement Frequently Asked Questions
Do you have any further questions? Speak to one of our friendly Case Managers to get personalised, helpful advice.
- How long does a Part 9 Debt Agreement stay on your credit file?
- Can I still enter into a Debt Agreement if I receive Centrelink payments?
- What debts can be included in a Debt Agreement?
- Are joint debts included in a Debt Agreement?
- How long will my Debt Agreement last?
- Can I repay the Debt Agreement early?
- How much will I be required to pay under a Debt Agreement?
- What happens if I cannot make payments part way through the Debt Agreement?
- How do I make repayments on my Debt Agreement?
- Can I get a loan after the Debt Agreement has finished?
- Will I lose my home if I enter into a Debt Agreement?
- What other options do I have?
How long does a Part 9 Debt Agreement stay on your credit file?
It will be on your credit file for a period of 5 years. During the agreement, your name will also be on the National Personal Insolvency Index. This may make it difficult to obtain further lines of credit. However, at the end of the agreement, your name will no longer appear on the NPII and the agreement is taken off your credit file.
You can improve your credit score quite quickly once the agreement is over by ensuring you repay your debts in full and on time.
Can I still enter into a Debt Agreement if I receive Centrelink payments?
You can enter it while receiving Centrelink Benefits or Pension Payments.
We believe someone on Centrelink benefits or a Pension should not enter a Part 9 unless you are:
- being supported financially by a partner (or friend)
- trying to protect your family home or motor vehicle
- or if there is a high likelihood that your circumstances will change in the very near future.
If you can afford the regular repayments we may explore this option with you but only after we eliminate all other debt solutions.
What debts can be included in a Debt Agreement?
All unsecured debts including:
- unsecured personal loans
- unpaid utility bills where the service is no longer being used
- disconnected phone bills
- credit cards
- Centrelink overpayments
- mortgage foreclosures
- debt leftover from repossessed cars
Unfortunately, there are some debts which we cannot include:
- mortgage payments
- secured car loans
- SPUR Debts and Fines
- Rental Arrears for an address where you are still residing
Are joint debts included in a Debt Agreement?
Yes. It is best to figure out how the other holder of joint debts plans on dealing with these debts before proceeding. The creditor may choose to pursue the other joint holder to resume the repayments lost.
How long will my Debt Agreement last?
Typically, 5 years. However, the specific terms and conditions are unique to the individuals and lenders.
How much will I be required to pay under a Debt Agreement?
One of the unique advantages of this solution is that it will allow you to make regular payments that you can afford. The amount typically relates to how much you make and how much you need to spend per month. In other words, you will not take on more than you can handle. These agreements should help you get out of debt rather than trap you further into debt.
How do I make repayments on my Debt Agreement?
A direct debit will be set up in a Trust Account so you can pay your contribution under the terms and conditions of the agreement.
Can I repay the Debt Agreement early?
You can repay it early with no penalty. However, it will remain as a default on your credit file for 5 years.
What happens if I cannot make payments part way through the Debt Agreement?
A Debt Agreement is legally binding. As a result, if you are unable to honour the terms and conditions that you originally signed up for, your creditors may terminate the agreement and force you into bankruptcy.
People’s circumstances can and do change, and if you find yourself in a situation where you have trouble keeping up with the payments, the administrator may suggest variations. Your creditors will need to vote on your variations in the same way the original terms and conditions were.
If your creditors approve your changes, then you will have a new legally binding debt solution that may make it easier for you to keep up with your repayment schedule.
Can I get a loan after the Debt Agreement has finished?
This will naturally depend on the criteria of the loan and your assets and liabilities at the time you request the loan.
Will I lose my home if I enter into a Debt Agreement?
A Debt Agreement has no impact on your mortgage. In fact, it should improve your cash flow and make it easier for you to afford your mortgage repayments.
The only way you could lose your house is if you stop making your mortgage repayments. The bank would then be within their rights to repossess your house.
What other options do I have?
You might also be interested in:
- Debt Consolidation through Mortgage Refinancing
- Informal Debtstroyer Agreement
- Financial Counselling
A Debt Rescue Case Manager will be able to advise you on your options and walk you through the pros and cons of each solution.
Need Help with a Part 9 Debt Agreement?
Our experienced Case Managers have helped thousands of Aussies out of debt – we can help you too. With a single phone call, we can get an idea of your financial situation and suggest the best way for you to get out of debt.