Entering into Debt Agreement has many advantages, but it has its disadvantages also. Debt Agreements were not designed so that people could get away without paying their debts. They are a legal alternative to Bankruptcy for insolvent Australians and as such, they do carry with them some repercussions. When considering a Debt Agreement, one must first of all ensure that they have been fully informed about these repercussions, and then weigh up the positives and negatives that are relevant to their own unique situation. For some people, the good outweighs the bad and a Debt Agreement ends up being a positive solution to the stress of having too much debt.
The main downside to doing a Debt Agreement is that it will put a default on your credit file for a minimum of 5 years (unless if the agreement runs longer than 5 years). There is also a permanent record of the Debt Agreement kept on the National Personal Insolvency Index. This one usually doesn’t concern people too much as it is a government index that requires one to pay a fee to look at it, so it is not usually accessed. In the interest of full disclosure though, it is important that you know it is there.
But there are also advantages to doing a Debt Agreement, the most popular one being that the interest on your debts is frozen. Your payments towards a Debt Agreement are generally more affordable than your regular creditor repayments too. Most importantly though, a Debt Agreement provides a way to become completely free of unsecured debt, as any remaining debt is legally written off once it is completed. It also gives you legal protection from your unsecured creditors, which is a huge relief for those who are paying off a home and scared that they might lose it if made bankrupt.
A simple exercise to get you thinking about whether a Debt Agreement might be worthwhile for you is to try to project into the future and picture your situation in 5 years (unless if the agreement runs longer than 5 years). Do you think you will be able to pay off your unsecured debt in that time? Or do you see yourself in the same position that you are now? Is it possible, even, that you will have even more debt? For those who cannot see an end to their debt problems, having a mark on their credit file for 5 years (unless if the agreement runs longer than 5 years) is a worthy trade-off if they are able to be debt free at the end of it.
If you are considering entering into a Debt Agreement, your first step is education. Our team have years of experience in setting up and administering Debt Agreements, and have an ethical “full disclosure” policy to ensure that you are equipped to make a fully informed decision. Call us on 1800 653 485 and let us help you to determine whether a Debt Agreement is the best course of action for you and your financial situation.
