Part IX debt agreements

If you are not currently in the position to pay your debts and want to protect an asset, such as a home, you can submit a Part IX Debt Agreement proposal for your creditors to consider. The Debt Agreement proposal provides details about how you will pay out your outstanding debts.

If your creditors accept your proposal and you enter a Debt Agreement, it will appear on your credit report for seven years and will be viewed as an act of bankruptcy. You will usually have to pay an upfront fee to a Debt Agreement administrator to enter the Agreement plus a monthly administration fee throughout its duration.

A Debt Agreement proposal becomes a formal agreement when creditors agree, either in writing or by vote at a meeting, to accept the terms of your Debt Agreement proposal.


Debt Agreements - beware

Before signing any debt agreement it is important to seek advice from a financial counsellor to ensure that it will not leave you worse off. Many Debt Agreement administrators aggressively promote their services and charge very high fees for services that you may not need and may work to your disadvantage. For example, if you are in receipt of Centrelink income only, it is protected from your creditors and if you have no asset to protect, a debt agreement is likely to leave you worse off because of the high fees charged.. So be sure to seek the advice of an independent financial counsellor who can help you choose the best option for your circumstances, ensure that your best interests are served and even negotiate with your creditors.

Before entering a debt agreement you might consider making an informal arrangement yourself with your creditors or bankrupting voluntarily.

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Who can enter into a formal Debt Agreement?

To be eligible you must:

  • not have been bankrupt or had a Debt Agreement in the last 10 years;
  • have unsecured debts of less than $100,664.20, have divisible property valued at less than $100,664.20;and
  • expect that your after-tax income for the next 12 months will be less than $75,498.15.

The above amounts apply from 2013 and are indexed. See AFSA for current amounts.

You should seek help from a financial counsellor before lodging a Debt Agreement proposal.

It is essential you have a full and complete understanding of the consequences of the Debt Agreement and any other available options for dealing with your debt.

You can find further information at AFSA.

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What do you have to do under a Debt Agreement?

The details of any Debt Agreement depend on the circumstances of the applicant and the willingness of the lenders to recover their money in the way proposed. The agreement may require that you do any of the following:

  • make payments from your income for an agreed period of time;
  • pay an agreed periodic payment to your creditors;
  • make a one-off lump sum payment in full and final settlement for your debts;
  • sell your assets and pay all proceeds to your creditors; or
  • ask your creditors for a temporary stop on payments you owe them for a specified time.

Making an application for a Debt Agreement is an act of bankruptcy, which means your creditors can apply to bankrupt you if they do not accept the proposal.

A Debt Agreement is legally binding on both parties.

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Lodging a Debt Agreement proposal

You need to download and complete the forms ‘Debt Agreement Proposal and Explanatory Statement’ and ‘Debt Agreement’ from AFSA and submit to the Official Receiver, a nominated officer at AFSA.

The Receiver will assess your proposal for completeness and your eligibility before convening a meeting where creditors will be asked to respond to your proposal.

A Debt Agreement proposal must gain the support of a majority in value of the creditors, i.e. those who together are owed more than 50% of the amount owed.

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Varying a Debt Agreement

Either you or the creditors with whom you have entered a Debt Agreement can apply in writing for a variation.

The creditors must use the same approval process that was used to approve the original Debt Agreement to determine the acceptability of the proposed variation.

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Public record and credit report

As with bankruptcy, a record will remain permanently on the National Personal Insolvency Index (NPII) and on your credit report for five years. Overdue debts also remain on your credit report for five years

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What employment restrictions apply with Debt Agreements?

Operating a business

You will be able to operate a business unless the terms of the agreement provide otherwise.  If trading under a business name or assumed name (whether alone or in partnership) the debt agreement must be disclosed to all people dealing with the business.

Director of a company

You may be a director of a company.

Other employment restrictions

Professional bodies and/or trade associations have certain conditions of membership for the duration of the agreement.  There may be restrictions on holding some statutory positions during the period of the agreement.

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