Part 9 Debt Agreement Discharge: What to expect once the agreement is over
A Part 9 Debt Agreement discharge is your chance for a fresh financial life. Your debts are repaid, your financial slate is clear and you are in a position to start over. It can be difficult to know where to start and you might be worried about making financial decisions. Here is what you need to know once your Part 9 Debt Agreement is over.
When are you discharged from a Part 9 Debt Agreement?
A Part 9 Debt Agreement generally lasts for 5 years. In certain circumstances, it can be reduced or extended depending on the situation. When you enter a Part 9 Debt Agreement, it is noted on your credit file and your name is listed on the National Personal Insolvency Index.
With no missed repayments, your Debt Agreement should drop off your credit file after 5 years (regardless of if you pay your Debt Agreement out early). Within one month and 1 day of being discharged, or after 5 years (whichever occurs last), your name will also be removed from the National Personal Insolvency Index (NPII).
What happens to the Debts in the Part 9 Debt Agreement
A Part 9 Debt Agreement Discharge means the debts which were included in the agreement have now been settled. Your creditors will no longer seek compensation for these debts. The only debts you may have to continue paying after your Debt Agreement are debts to the Commonwealth, such as:
- Centrelink debts
- Debts incurred by fraud
- Child support
- SPUR debts and fines
- Penalties or other court-ordered payments
- Student HECS, HELP and Student Financial Supplement Scheme debts
Your Debt Agreement Administrator would’ve let you know if you had to continue paying these debts after your Part 9 Debt Agreement had finished. If you aren’t sure, give them a call.
The Impact on your Credit File
The end of your Part 9 Debt Agreement should coincide with it dropping off your credit file and your name being removed from the NPII. Leaving you with a clean slate to rebuild your finances.
Immediately after your Part 9 Debt Agreement discharge, you might find your credit score to be quite low. This is most likely due to a lack of financial activity in your credit history and should improve in the coming months.
A Part 9 Debt Agreement is a sure fire way to clear your financial slate and start fresh. As all your unsecured debts are in a repayment arrangement, you won’t receive any defaults so once your Debt Agreement is over, your credit file will be clean.
How to Move Forward after a Part 9 Debt Agreement Discharge
It’s time to enjoy your financial freedom! After a Part 9 Debt Agreement discharge, people tend to develop better money management and budgeting skills, acutely aware of the pain and stress financial hardship can cause. So once the Debt Agreement is over they make better financial decisions, don’t over commit and go on to live a financially successful life, whether it be owning their own home, or staying out of debt.
Take the following steps to ensure you don’t end up in the same situation again.
Banks like to see how well you can handle your debt before they lend you money. That’s why a lack of activity on your credit file could lead them to decline you a new loan. To help it along the way, apply for a small loan through a legitimate lender. Make sure you can afford the repayments and you aren’t going to a payday or cash loan lender. By maintaining the repayments of this small loan, you are showing lenders you are capable of managing your money and after 6 months, your score should have improved significantly.
You will now be in a position where you can apply for a larger loan, such as a home loan, at a normal interest rate.
Check your financial habits
If you want to keep control of your finances, the best thing to do is organise some sort of budget for your household. By keeping track of your money and your debt you will know your limits and avoid over-committing yourself. There are heaps of really useful apps you can download on your phone to help you keep track of spending.
Make sure you are putting money aside for big bills and expenses and avoid using credit cards and payday loans. If you receive a huge bill you can’t afford to pay, call your creditor direct and try to organise a payment arrangement.
Don’t commit to financing unless you have the money to make repayments. Use a repayment calculator to make sure you can manage the payments over the long term.
Finally, make sure you have some kind of rainy day fund in place. This could even be taking out income protection or life insurance.
Seek Immediate Help
Sometimes someone who has successfully repaid a Part 9 Debt Agreement will fall into financial hardship again. If this happens, the same services and solutions aren’t available, limiting your options to get out of debt. You cannot enter a Part 9 Debt Agreement if you have been Bankrupt or in a Debt Agreement in the previous 10 years.
Depending on your situation, you be able to reach a hardship arrangement with your creditors, you might be eligible for an Informal Debt Agreement or Bankruptcy could be your best solution. Don’t let your debt get out of control. The sooner you act, the more options you will have available to you.
Where to turn for help
Debt Rescue has put together a helpful budgeting guide to assist our clients on the Road to Financial Freedom. You can also turn to the government website MoneySmart for lots of great advice on how to manage your money.
If you are having trouble getting your finances back on track, give us a call. Debt Rescue offers a range of financial solutions to suit every situation. Our Case Managers are always happy to talk over your situation and offer advice. You can chat for free on 1800 00 3328.