When you are in debt and looking for a way out, you will come across a number of debt relief solutions. Words like consolidation, refinancing, informal agreements, part nines and bankruptcy will all come up in conversation.Then it’s up to you to sort through the jargon and try to determine which pathway is the best for you. To help lift the fog on debt relief solutions I have put together a blog post on one of the most common – Part 9 Debt Agreements. In this post I will aim to explain exactly what a Part 9 Debt Agreement is, how it will hep you out of debt and what you can expect in the lead up, during and after the agreement has finished.
What Is a Part 9 Debt Agreement?
A Part 9 Debt Agreement is a legally binding agreement under the Bankruptcy Act 1966 between you and your creditors outlining a new payment arrangement which you can afford.
In other words, a Part 9 Debt Agreement is when you prove to your creditors you can no longer afford to repay your debt and propose a new payment arrangement which you can afford.Depending on your circumstances, the payment arrangement you propose could include:
- Paying back a percentage of every dollar owed in regular repayment amounts
- Paying back a percentage of every dollar owed in one lump sum (usually through the sale of large assets)
- Freezing interest and fees on the debt
- Temporarily stopping repayments altogether
- A combination of the above options
Once you have put your proposal together it is submitted to your creditors for them to vote on. If your creditors agree with your terms, the Debt Agreement begins.
Proposing a Part 9 Debt Agreement
Proposing a Part 9 Debt Agreement is a huge task. The proposal must comply with a wide range of requirements set out by the Australian Financial Security Authority (AFSA). The professionals at Debt Rescue know the ins and outs of the entire process and will ensure your proposal is completed quickly and correctly. There are a few things to consider before you start your debt agreement proposal:
- Only unsecured debts can be included in a Part 9 Debt Agreement. Secured creditors may seize and sell any assets you have offered as security for credit if you were to ever default.
- If you have a joint debt with another person entering into a Debt Agreement does not release them from their debt. Creditors may pursue them for their portion of the debt.
- A Part 9 Debt Agreement is a form of Bankruptcy. Your name will be listed on the NPII (National Personal Insolvency Index) until the agreement is complete.
- If you have been Bankrupt, had a debt agreement or given an authority under Part X of the Bankruptcy Act in the last 10 years you are not eligible for a Part 9 Debt Agreement.
The most important part of a Debt Agreement proposal is putting forward your new repayment schedule. Usually this can be calculated by looking at your income and taking out all your essential expenses such as petrol, groceries, rent/mortgage/rates. What ever is left over once your essential expenses are paid is the amount we work to for your debt agreement. This figure must be affordable for you in your current financial situation but should also aim to appease your creditors.
Once the Debt Agreement proposal has been put together it is sent to the creditors to vote on. In order for it to be approved you need to gain the vote of creditors who hold more than 50% of the value of your debt. Once you have their approval, all creditors are bound to the agreement, even those who voted against it..
During the Part 9 Debt Agreement
As soon as the Part 9 Debt Agreement is in place your creditors must cease all recovery action. This means no more harassing phone calls or emails.
It is important to maintain your regular repayments. Remember you proposed this agreement based on what you know you could afford, so these repayments should be manageable for you, even in your financial position. However if your circumstances do change and your repayments become unmanageable you need to let your creditors know straight away. If you don’t receive a regular income or fall into hardship through losing your job or some other emergency, you might be able to temporarily or permanently adjust your debt agreement repayments.
At the end of your Part 9 Debt Agreement you are released from all your debts covered by the agreement.
Where to go from here
If you think a Part 9 Debt Agreement is the right debt relief solution for you it’s time you talk to Debt Rescue. Our trusted and friendly case managers will assist you in putting your proposal together and negotiating with your creditors for you. Debt Rescue has been operating in the debt solution space since 2005 and takes the time to get t know our clients and provide the best possible solution for their situation. So call us today and talk to an Aussie who Cares on 1800 00 3328.