If you are experiencing personal debt solutions, then one solution that you may be considering is a Debt Agreement. But what is it and how does a Debt Agreement work?

A Debt Agreement is a formal agreement established between you and your creditors. It is governed under the Bankruptcy Act, which is why people always assume that it is Bankruptcy. It is not; it is an alternative to Bankruptcy.

The way a Debt Agreement works is that you submit an agreement to your creditors whereby you propose to pay back as much as you can afford towards your debts (usually for an amount less than what you owe) over a period of time. A typical Debt Agreement lasts for 3 to 5 years after which all your all your unsecured debts (that you had when you entered into the agreement) will be written off and your creditors will be unable to recover the rest of the debts you owe.

In order for your Debt Agreement to be formally approved and set up, creditors that hold the majority of your debts need to agree to it. If they do, then the Debt Agreement is binding on all creditors.

There are many advantages to a Debt Agreement. It freezes interests on debts and prevents creditors from constantly hassling you. It also gives you more freedom than other forms of debt solutions such as Bankruptcy, which limits your ability to travel overseas.

However, there are also some disadvantages that do come with entering into a Debt Agreement. It will be permanently recorded on the National Personal Insolvency Index and a default will be on your credit for a minimum of five years. If your Debt Agreement runs for over 5 years then this number could change.

If you would like to know more about how a Debt Agreement works or whether it is the right solution for you, then please call our friendly and professional debt consultants on 1800 653 485.