What is a Part 9 Debt Agreement?
A Part 9 Debt Agreement is a legal and binding agreement between you and your creditors. It outlines a new affordable payment arrangement of your unsecured debts. This 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 agreements fall under Part 9 of the Bankruptcy Act 1966. So, technically, it is considered a form of bankruptcy. However, it’s very different from declaring bankruptcy itself. Entering a Part 9 Debt Agreement doesn’t carry the same restrictions as 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?
The Part 9 Debt Agreement was written into the Bankruptcy Act to allow people to honour their creditors, repay their debts, and avoid the harsh restrictions of bankruptcy. Today, it’s one of the most popular forms of debt relief.
Assuming you adhere to the terms of your debt agreement, you’ll 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.
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-year 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 with a Debt Agreement
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 they understand the ins and outs of the process. We use this experience to get the best possible outcome for our clients.
As part of the Lanyana Financial Group of companies, Debt Rescue is a Registered Debt Agreement Administrator (RDAA 1337).
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 approved by you, is lodged with AFSA. AFSA forwards this to your creditors for their consideration and they 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
Still want to know more about how a debt agreement works? We’ve got the answers to all the common questions below.
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 will be 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.
What makes me eligible for a Part 9 Debt Agreement?
You can be eligible for a Part 9 Debt Agreement if you:
- Aren’t able to pay your debts when they’re due
- Haven’t been bankrupt
- Haven’t had a debt agreement or personal insolvency agreement in the last 10 years
- Have unsecured debts and assets less than the set amount
- Can estimate that your after-tax income for the next 12 months to be less than the set amount.
Our Case Managers can discuss your situation with you and help you work out if you’re eligible for a Part IX Debt Agreement.
What debts can be included in a debt agreement?
Typically, Part 9 Debt Agreements are for unsecured loans, such as:
- 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 a repossessed car.
Unfortunately, secured loans can’t be included in a Part 9 Debt Agreement. These will often include:
- Home loans
- Secured car loans
- SPER debts and fines
- Some Centrelink debts
- Rental arrears for an address where you’re still residing.
Joint debts can also be included in a debt agreement, but the co-borrower will continue to be liable for the full debt. It’s 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 my debt agreement last?
Typically, 5 years. However, the repayment term of the debt agreement can be tailored to your individual circumstances.
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 can terminate the agreement, re-instate all debts and pursue you for collection of those debts that remain unpaid.
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.
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 to 1800 00 3328, we can get an idea of your financial situation and suggest the best way for you to get out of debt.