Are you struggling with unmanageable debt?
You are not alone! 7 out of 10 Australians have admitted to experiencing financial difficulty in their life.
In fact financial hardship has become so common in Australia, the government introduced legislation to allow people the opportunity to negotiate their debts down and attempt to repay their creditors while avoiding bankruptcy. This legislation is a Part 9 Debt Agreement.
What is a Debt Agreement?
After taking your household expenses and income into account we put forward a proposal to your creditors offering less than the full amount they are owed – an amount you can afford.
A Debt Agreement is in place once your creditors agree to this sum of money in satisfaction of your debt.
A Debt Agreement will reduce your unsecured provable debts*, freeze all future interest, reduce your repayment amounts, in most cases reduce the repayment period and stop the harassing phone calls and recovery action from your creditors.
Debt Agreements - Helping Australians Out Of Debt
Is it the right Solution for you?
Although it is considered a form of bankruptcy, it is a preferred alternative to declaring full bankruptcy as it does not carry the same permanent or serious consequences. A detailed list on the benefits and consequences of a Debt Agreement can be found below.
A Debt Agreement is a legal and proven way to repay the debts you owe while reducing the stress of financial hardship. A Debt Agreement is marked on your credit file for 5 years, but is removed after 5 years and 1 day which allows you to start to rebuild your credit file as soon as the Debt Agreement is repaid.
If you aren’t sure if a Debt Agreement is the best Debt relief solution for you, call our Case Managers for an obligation free chant about your situation today!
You might be eligible for a Debtstroyer Agreement, Debt Consolidation or even a Bankruptcy. Our Case Managers will recommend the best solution for your situation.
Here’s how a Debt Agreement works
A proposal based on this surplus amount is prepared by your Case Manager and forwarded to your creditors for their consideration and vote. If it is accepted by the majority of the creditors, you will be bound by the terms of the Debt Agreement.
If your Debt Agreement is not agreed on by the majority of your creditors, your Case Manager will review your financial circumstances and discuss alternatives with you.
Once your Debt Agreement has been accepted, it will be administered by Insolvency Administration Services. This is our Registered Debt Agreement Administrator handling the administration of our Debt Agreements.
You will be required to make regular repayments into a Trust Account. Insolvency Administration Services will then distribute the money to your creditors as agreed in the Debt Agreement and maintain required correspondence with your creditors over its term.
Do you Qualify?
There are certain guidelines and thresholds you must meet in order to be eligible for a Debt Agreement. These are as follows:
- If you have been bankrupt or in a Debt Agreement before, you must have completed your Debt Agreement or term of bankruptcy at least 10 years ago.
- Your income after tax must be less than $80,480.40* net per annum, per applicant.
- The value of your unsecured assets (including equity in property) can not exceed $107, 307.20*
- Your unsecured debts must be less than $107, 307.20*
*These amounts are updated in March and September each year. These amounts are correct as of 20 September 2015
If you don’t fit into this criteria but you are really struggling with your debts, you might qualify for another debt relief solution. Debt Rescue also offers Debtstroyer Agreements, Debt Consolidation and assists with Bankruptcy. If you aren’t sure what direction to take, give us a call for an obligation free chat with one of our Case Managers.
The Benefits of a Debt Agreement
If you have fallen behind in your regular debt repayments and can’t see a way of catching up, a Debt Agreement can help you get back on top of your debts. Here are some of the benefits you can enjoy from entering into a Debt Agreement.
- It will provide you with a viable alternative to bankruptcy and the serious consequences and limitations that go along with it.
- You only need to make one easy regular payment. Insolvency Administration Services will administer all of the payments to your creditors on your behalf.
- Calls and harassment from creditors cease once they recognise we are working with you to find a solution and by law they must not pursue any recovery action after lodgement of the Debt Agreement with AFSA.
- Interest is frozen on all unsecured debts provided you adhere to the terms of the Debt Agreement.
- It will allow you to significantly reduce the total amount you would otherwise have to repay to your creditors.
- The discipline of having one realistic repayment makes it easier to budget your money, allowing you to afford essential household expenses, previously sacrificed to pay off creditors.
- Insolvency Administration Services continues to communicate and negotiate with your creditors throughout the term of the agreement.
- We will continue to work with you to smooth out your circumstances or possibly help pay your agreement out early.
- Flexibility when your financial situation improves.
- Not all creditors need to agree to your proposal. You only need the majority to agree or 50% of dollar amount to be accepted.
The Consequences of a Debt Agreement
A Debt Agreement is a government legislated and legally binding agreement. It is also part of the Bankruptcy Act. While it relieves the stress of repaying your debt, it still requires hard work and commitment. Here are some of the consequences associated with entering into a Debt Agreement.
- If you don’t meet the terms of your Debt Agreement or make your payments in full and on time, the creditors are within their rights to recommence collection proceedings, legal action or enforce bankruptcy.
- The Debt Agreement will be noted on your credit file for a period of 5 years.
- As it is an Act of Bankruptcy, your name will be listed on the National Personal Insolvency Index while you are in the agreement – generally for a period of 5 years.
- Not all debts can be included in a Debt Agreement. Secured debts and some state debts (eg. fines) can not be included.
- A Debt Agreement does not release another person from a joint debt.
- There may be some restrictions to employment or licensing in certain industries.
Comparing Debt Relief Solutions
A Debt Agreement might seem like an extreme measure to get out of your debt situation, but for thousands of Australians, it is a sustainable and smart solution to their debt. This chart compares a Debt Agreement to other debt relief options – bankruptcy and taking no action at all.
|Debt Agreement||Bankruptcy||Doing Nothing|
|Debts which can be included||The value of unsecured debts can not exceed $107,307.20.||No Restriction. However, all assets are sold to repay any outstanding debts.||Can accumulate unlimited debt to cover rising costs and interest.|
|Earning capacity||No Limit. Can not exceed $80,480.40* per annum after tax at time of lodgement.||A person who is bankrupt must pay 50c for every $1 earned above $53,653.60* a year.||The stress from financial hardship can lead to anxiety or depression which can affect the way you work|
|Operating a business||In some industries and professions you must disclose you entered into a Debt Agreement.||You cannot be a director of a company or be involved in its management without permission of the court.||Anxiety and stress may force you to cut back on major responsibilities such as operating a business.|
|Can I own real estate/property?||Yes. Up to $107,307.20* in value.||Yes if equity is below set threshold.||Home could be repossessed|
|Value of the vehicle I drive||No Restriction||$7,600* maximum equity||Car could be repossessed|
|Applying for a loan||The ability to obtain further credit is affected for up to 5 years.||Can not borrow over $5,447*. You must inform your creditor that you are an undischarged bankrupt.||Having several unpaid debts will make it virtually impossible to secure any new finance.|
|Asset restriction||Can keep home, cars, tools for work and other assets up to $107,320.70*.||Can not own assets with value exceeding set thresholds, Often cars, homes, tools and other valuables must be sold.||Even purchasing necessary household items will become difficult as you tighten your belt on spending.|
|Overseas travel||No Restriction||Restricted.||Travel will become impossible to afford.|
|Inheritances and windfalls||No Restriction to any financial improvement after accepted.||To be distributed to creditors via the bankruptcy trustee||Any unexpected windfalls will go straight toward your late repayments to try to reduce late fees.|
Entering a Debt Agreement
If you would like to enter into a Debt Agreement to reduce your debt, freeze your interest and get your creditors off your back you can apply today. Simply use the contact form on the right of this page or give us a call on 1800 00 3328.
Free Call: 1800 00 3328