Debt Agreements fall under Part IX of the Bankruptcy Act, 1966. It is a debt solution that is designed to assist people in financial distress to pay off their bills over an agreed amount of time, making it a viable option for those who cannot pay everything they owe back, but still want to avoid bankruptcy.

In order to enter into a Debt Agreement, you need to meet all of the eligibility requirements, as listed by the Australian Financial Security Authority (AFSA):

•  Debtors need to be insolvent, meaning they cannot pay the debts owed
• Debtors cannot have previously entered into a Debt Agreement or been bankrupt
• A debtor’s total value of unsecured debts, assets and after-tax income must not go over the threshold indexed amount as specified by AFSA. Currently, the limit for unsecured debts is $109,473.00 as established in s185C(4)(b), (c) & (5).
• The debtor needs to pay the Debt Agreement proposal lodgement fee, which is $200 (at the time of writing)

If you meet all of the criteria, then you can prepare a Debt Agreement Proposal with the assistance of a Debt Agreement Administrator. Each proposal’s terms and conditions will vary according to each debtor, what they can afford to pay and the amount of time stipulated. When drafting a Debt Agreement Proposal, it is important to offer an amount that will keep all your creditors happy, but that you can still realistically pay.

This proposal will then be sent to your creditors, who can then accept or reject it. In order for you to be able to enter into the proposed Debt Agreement, the majority of creditors need to accept it. If it is accepted, then the creditors accept the terms and the Debt Agreement will start. Each creditor will receive the same percentage return as each other. For example, if it is agreed that you will pay back 85% of your debts over 3 years, then each creditor will receive 85% of what is owed.

However, it is important to note that in the case that your Debt Agreement is rejected, your creditors could use the proposal to apply to the court to make you bankrupt. This is why it is crucial that you are certain that proposing a Debt Agreement is a step that you want to take.

A Debt Agreement will finish once all conditions of the Debt Agreement are fulfilled.

At the Debt Agreement Advice Centre, our friendly and professional consultants have many years of experience in providing people with expert advice on debt relief solutions. If you would like to learn more about a Debt Agreement and if it is the right option for you, then please contact us today on 1800 653 485.