The Truth About Part Nine Debt Agreements
There is a lot of information circulating about Part Nine Debt Agreements which can be confusing and misleading. Especially for someone who is considering using a Part Nine Debt Agreement to get out of debt. As one of Australia’s leading debt relief solution providers, Debt Rescue offers a range of positive solutions to bad debt, including Part Nine Debt Agreements. In the hope of breaking through the noise, we have put together an honest tell-all about Part Nine debt Agreements, the impact they have on your life, and how they can help you free yourself from your debts.
What is a Part Nine Debt Agreement?
A Part Nine Debt Agreement was introduced almost two decades ago as an alternative to bankruptcy. It is a legally binding contract between you and your creditors which allows you to negotiate the repayment of your debts to something you can afford. Often a Debt Agreement will also freeze the interest and fees on your debts so you are only repaying what you borrowed and not putting money towards interest.
A Part Nine debt Agreement forms part of the bankruptcy act so it is considered a form of bankruptcy. However because it allows you to honor your creditors by paying them what you can, the restrictions and obligations aren’t as severe as those associated with full bankruptcy.
What restrictions are involved?
A Part Nine Debt Agreement will be noted on your credit file. In order for you to qualify for a Debt Agreement, you need to be experiencing quite severe debt. The chances are you will have many defaults and judgements already on your credit file which will make it hard for you to get any lines of credit. However unlike bankruptcy, you can still apply for loans up to $5000 while you are in your Debt Agreement. Companies such as our affiliate partner, Positive Solutions Finance are able to help people with bad credit find finance through a panel of non-conforming lenders.
Your name will be listed on the National Personal Insolvency Index. As all Debt Agreements are monitored by the governing authority AFSA, your name will be listed on the NPII. This is a list with the basic personal details of everyone who has ever entered into a form of bankruptcy. This list can be accessed by anyone at anytime for a fee. While this won’t interfere with most people, some professions won’t allow bankrupt people to work, such as real estate agents, financial professionals and some trades/licence holders. If you aren’t sure if entering a form of bankruptcy will harm your ability to work, it is best to check with your licensing authority or professional body first.
Unlike full bankruptcy, you are still able to own assets, such as your home and car without limitations on their value, you can continue to earn money without garnishing your wages and you could travel overseas without first seeking permission.
How Does a Part Nine Debt Agreement Work?
Any eligible person can apply for a Debt agreement using the approved forms available on the AFSA website. However the process can be incredibly daunting, confusing and difficult so it is recommended you employ the help of a Debt Agreement Administrator.
The process begins when you put a proposal forward to your creditors suggesting a new repayment schedule. This proposal should be realistic as to what you can afford both now and into the future. Your creditors will then be given 21 days to review your proposal and vote either for or against your Debt Agreement. All your creditors are given the chance to vote however not all of them need to vote in your favour for the agreement to be accepted. As long as the majority of your creditors agree. If your Debt Agreement is rejected by your creditors, your Debt Agreement Administrator will renegotiate your proposal and try again.
At Debt Rescue, our Debt Agreement Administrators will first sit down with you and work out a budget. Your administrator will need to know all about your finances to determine how much money is left over once all your expenses are paid. This will determine the amount we put forward to your creditors.
Can I enter a Part Nine Debt Agreement
In order to enter a Part Nine Debt Agreement you must comply with set criteria:
- You must be insolvent – that is, being unable to pay your debts when they are due
- You must not have entered into a state of Bankruptcy in the last 10 years. That includes having declared bankruptcy or having been in a Part Five or Part Nine Debt Agreement.
- You must not earn more than the indexed amount set by AFSA
- Your unsecured Debts must not be greater than the indexed amount set by AFSA
- You must be able to pay the debt agreement lodgment fee
Part Nine Debt Agreements to overcome bad Debt
While a Part Nine Debt Agreement has lasting consequences on your credit file, it also offers a solid foundation from which to rebuild your finances once your debts are repaid. If you are in financial hardship and are struggling to repay your bills, you will know all too well the stress and pain debt can cause in your life. Entering a Part Nine Debt Agreement can instantly improve your quality of life and help to get you back on track.
It is not a quick fix or a bandaid to your debt. It is a serious long term solution which will help you to develop money management skills and responsibility along the way. Once you have finished your debt Agreement you will know the importance of making regular repayments, on time, how easy it is to stick to a budget and live within your means.
But you don’t need to wait until the Part Nine debt Agreement is over before you can enjoy it’s benefits. As soon as you send your proposal to your creditors, all recovery action must stop. This means you won’t receive any more of those harassing phone calls and emails. You can take comfort in the fact you are taking steps towards improving your financial situation and gain control back over your life.
Alternatives to a Part Nine Debt Agreement
If you don’t think a Part Nine debt Agreement is the right solution for you, there are other ways to reduce your debt before you need to consider bankruptcy.
A Debtstroyer Agreement is an informal Debt Agreement between you and your creditors. It acts in the same way as a Part Nine Debt Agreement, but it is negotiated privately so your name won’t be listed on the National Personal Insolvency Index. A Debtstroyer Agreement won’t impact your credit file like bankruptcy would, making it the perfect solution for people who can’t declare bankruptcy because of their profession. As a Debtstroyer agreement is negotiated Privately, you need to prove you are in genuine financial hardship through a sudden and unexpected change in your circumstances – such as a loss of income. You can learn more about Debtstroyer by reading our blog post: Debtstroyer: an Informal Debt Agreement.
Debt Consolidation can reduce your interest, debt amount and regular repayments by combining all your debts into one. The most popular form of Debt Consolidation is through a Debt Consolidation Loan. This is when you apply for a loan large enough to pay out all your existing debts. Then you are left with one loan, one repayment, one interest rate and one set of fees. through a debt consolidation Loan you have essentially slashed your interest and repayment amounts in order to better manage your debt. You can learn more about Debt Consolidation Loans on our blog post: Debt Consolidation Facts: What you need to know.
Talk to an Aussie Who Cares
Are you still confused about how to handle your financial situation? Give Debt Rescue a call. Our experienced Case Managers will be able to talk through your financial situation, learn a little more about you and make a recommendation on what you can do to reduce your debt. For a no obligation chat, call Debt Rescue on the toll free number 1800 00 3328.