Debt Agreements

A debt agreement is a way of resolving your debt issues without becoming bankrupt. This is done by organising an affordable, legally binding agreement with your creditors through a formal proposal.

It is important to remember that a debt agreement is not a loan however in some cases works like a loan with interest free & affordable repayments.

Benefits
A debt agreement is a legally binding arrangement with your unsecured creditors, this means that while the agreement is in place your creditors can take no action to recover the debt outside the terms of the agreement, stopping the harassing phone calls and letters you may be getting.

A debt agreement has the ability to; freeze payments and interest upon acceptance, release you from your debt by paying less then the full amount that you owe, put a hold on payments for extended periods of time and even transfer assets or property such as cars, televisions etc. from your name to your creditors releasing you from your debts.

A debt agreement also allows you to pay back your debts over an extended period of time, this may allow the repayments to become affordable as you may have found it hard to keep up in the past.

Another benefit of a debt agreement is that not all of your creditors have to agree, only the majority in the dollar amount of the creditors who decide to vote. However once accepted all of the creditors listed in your proposal are legally bound by your agreement (even those who didn’t vote).

Once your debt agreement is accepted for processing by the Insolvency & Trustee Service Australia (ITSA) you are under no obligation to pay your unsecured creditors, between the acceptance date and the deadline date, however you may wish to do so.

Facts
You can enter into a debt agreement if you are insolvent (when a person is insolvent it means they cannot pay their bills and debts when they fall due).

You can enter into a debt agreement if; you have an after tax income of less then around $59,186.45 per year.

You can enter into a debt agreement if; the total of your unsecured debts is less then around $78,915.20.

You can not enter into a debt agreement if; you have entered into a debt agreement, been bankrupt or completed an authority under Part X (10) of the Bankruptcy Act in the past ten years.

A debt agreement is not the same as becoming bankrupt it is an alternative to bankruptcy, however some people consider a debt agreement to be an “act of bankruptcy.”

Many people enter into a debt agreement when they become aware of the impeding restrictions that bankruptcy has to offer.

ITSA is a government department who is responsible for reviewing your proposal and other similar matters.

Once ITSA accepts your debt agreement for processing, your creditors have the ability to accept or reject your proposal, usually within 25 working days.

Your debt agreement and your debt agreement proposal are both registered on the National Personal Insolvency Index (NPII).

Some credit reporting agencies such as Veda Advantage may use this NPII to advise some creditors that you have submitted and/or are under a debt agreement.

Example
You may owe $10,000 to 3 diferent creditors. You may owe $5,001 to the first creditor, $3000 to the second creditor and $2,000 to the third creditor. If the first creditors votes "yes" with the $5,001, the other two creditors are also bound by the agreement.

More frequently asked questions or find out how we can help you with a debt agreement.