A Debt Agreement is an option for those who are experiencing personal financial difficulties. To be eligible to enter into a Debt Agreement, you need to meet certain requirements.

The first criteria you need to meet is that you need to be insolvent. This means that you are “unable to pay your debts as and when they fall due.” Insolvency includes being able to pay your debts but resorting to credit to do so.

To be eligible to enter into a Debt Agreement, you also need to meet thresholds called “indexed amounts.” These indexed amounts concern your annual income, total unsecured debt amount and equity in any assets you may have.

If you fall under the threshold in all of these areas, then you are eligible for a Debt Agreement.

These thresholds are updated twice a year in March and September but the indexed amounts are current (at the time of writing):

Income (after tax) – $ 83,169.45
Total unsecured debts – $110,892.60
Total unsecured assets – $110,892.60

While meeting the above requirement means that you are eligible to enter into a Debt Agreement, you also need to ensure that you have the ability to honour it.

This is why a Debt Agreement Administrator will conduct an investigation into your personal financial affairs to determine whether or not you will be able to afford an acceptable Debt Agreement repayment plan, even after you have paid for your essential living expenses.

If you would like to learn more about entering into a Debt Agreement, then please contact Debt Agreement Advice Centre. We will give you a free initial consultation so that you can make sure that a Debt Agreement is the right solution for you before making any payments.

Please contact us on our 24/7 toll-free hotline on 1800 653 485.

A Debt Agreement is an arrangement between you and your creditors whereby you pay them back an amount that you can comfortably afford and that they accept. It runs for usually 3 to 5 years and during this time, all interest is frozen and creditors are unable to take any further recovery action against you.

By entering into a Debt Agreement, you have the legal responsibility to ensure that you can honour your commitment for the entire duration and pay back the agreed amount.

But what happens if you default on a Debt Agreement?

If for any reason, you default on your payments, you have exactly three months to make up for the missed payments. If you are unable to do so at three months and one day, then your Debt Agreement Administrator must send out a statutory default notice to all your creditors telling them this.

After another three months, if you still miss payments, then your Administrator must send yet another statutory default notice to your creditors, and so forth.

Your creditors can then use these notices to terminate your Agreement. A warning sign is when, after receiving three default letters, they ask your Administrator for a Status Update report.

As a consequence, if your Debt Agreement is terminated, then all your debts and interests will be reinstated as if the agreement never happened. Also, you will no longer have legal protection from your creditors.

Your Debt Agreement status will come up as “unfinalised” for up to 7 years in which the default will then be cleared from your name.

If you have a valid reason as to why you have defaulted on your Debt Agreement, then it is possible to update your arrangement but it must be done with the agreement of your creditors.

A Debt Agreement is a good debt solution for those who are struggling with their personal finances. As you can see, though, it is important that you propose an arrangement that you will be able to sustain for the entire duration of the agreement. Talk to a professional Debt Agreement consultant at DAAC for expert advice on your repayment capabilities on 1800 653 485.