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 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 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 restrictions as Bankruptcy.
Am I Eligible for a Debt Agreement?
You are eligible to enter a 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 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.
Being part of the Lanyana Financial Group of companies, Debt Rescue is a Registered Debt Agreement Administrator (RDAA 1337). 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.
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 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?
- Is a Part 9 Debt Agreement a Government legislated agreement?
- Do all my creditors have to agree to a Debt Agreement?
- What other options do I have?
How long does a Debt Agreement stay on your credit file?
A Debt Agreement will be listed 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 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?
There is no restriction on you entering into a Debt Agreement whilst receiving Centrelink Benefits or a Pension.
We encourage someone who is on Centrelink benefits or a Pension should not enter a Debt Agreement, unless they are:
- being supported financially by a partner (or friend);
- trying to protect their family home or motor vehicle;
- have sufficient capacity in their budget to meet their living expenses; and/or
- there is a high likelihood that their circumstances will change in the 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?
Unsecured debts including:
- credit cards
- personal loans
- ATO tax debts
- unpaid utility bills where the service is no longer being used
- disconnected phone bills
- mortgage shortfalls
- debt leftover from repossessed car
Unfortunately, there are some debts which cannot be included:
- home loans
- secured car loans
- SPER debts and fines
- some Centrelink debts
- rental arrears for an address where you are still residing
Are joint debts included in a Debt Agreement?
Yes. However, the co-borrower will continue be liable for the full debt. It is best to figure out how the co-borrower plans on dealing with the debt before proceeding. The creditor may choose to pursue the co-borrower to resume the repayments lost.
How long will a Debt Agreement last?
Typically, 5 years. However, the repayment term of the Debt Agreement can be tailored to your individual circumstances.
How much will I be required to pay under a Debt Agreement?
A Debt Agreement repayment is based on a regular amount you can afford, after taking into account your budgeted income and living expenses. We will not place you in a position you cannot handle financially. A Debt Agreement will help you get out of debt rather than trap you further into debt.
How do I make repayments on a Debt Agreement?
An affordable regular direct debit payment will be set up from your bank account. These payments will go into a Trust Account to be distributed to your creditors in accordance with the terms and conditions of the Debt Agreement.
Can I repay a Debt Agreement early?
Yes. There are no early payout penalties.
What happens if I cannot make payments part way through the Debt Agreement?
A Part 9 Debt Agreement is a legally binding agreement. As a result, if you are unable to honour the terms and conditions of the agreement, your creditors have the opportunity to terminate the agreement, re-instate all debts and pursue you for collection of those debts which remain unpaid.
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 Variation to your agreement. Your creditors will need to vote in favour in the same way the original Debt Agreement Proposal was.
Can I get a loan after the Debt Agreement has finished?
Depends. This will be up to the lender’s loan criteria, your repayment capacity and the amount of the loan you have requested.
Will I lose my home if I enter into a Debt Agreement?
A Debt Agreement will not have a direct impact on your mortgage. You will still be required to make your mortgage repayments in full and on time.
Is a Part 9 Debt Agreement a Government legislated agreement?
Yes. A Part 9 Debt Agreement is a legislated agreement under Part IX of the Bankruptcy Act 1966. The Australian Financial Security Authority (“AFSA”) is the government body responsible for regulating the Bankruptcy Act. All Part 9 Debt Agreements are submitted to AFSA to assess if the Debt Agreement Proposal satisfies the eligibility requirements before being voted on and accepted by your creditors.
Do all my creditors have to agree to a Debt Agreement?
No. However, for the Debt Agreement to be accepted more than 50% of your creditors, by value, will need to vote in favour of your Debt Agreement Proposal. Not all creditors have to vote and only those creditors who do vote, will be taken into consideration in determining the outcome of the Debt Agreement Proposal acceptance.
What other options do I have?
You might also be interested in:
- Debt Consolidation through Mortgage Refinancing
- An Informal Debt 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.