A Debt Agreement is an arrangement available to insolvent Australians as a means of settling their unsecured debts without having to go bankrupt. It is governed by the Bankruptcy Act and, as such, it is subject to strict regulations and some eligibility criteria.

The first criterion for proposing a Debt Agreement, as stated above, is that you have to be insolvent. Being insolvent means that you have more debt than you have money to service it, that you are “unable to pay your debts as and when they fall due”.  If you are managing to pay your debts, but have to use credit to do so, then you are probably insolvent.

The second set of criteria revolve around the statutory thresholds called “indexed amounts” that relate to your annual income, your total unsecured debt amount, and equity in any of your assets. You are eligible to propose a Debt Agreement if your income, debt, and assets all fall below the statutory thresholds. They are indexed every six months or so and generally increase slightly at that time, but they currently stand at:

• Income before tax – $119,138
• Income after tax – $85,858.50
• Unsecured debt/equity in asset – $114,478.00

If you meet all of the above criteria you are legally eligible to propose a Debt Agreement. But there is also the matter of feasibility – there is no point in you putting forward a Debt Agreement proposal if you do not have the funds available to sustain it. To determine if you are able to maintain a Debt Agreement proposal that will be acceptable to your creditors, a reputable Debt Agreement Administrator will conduct a thorough investigation of your financial affairs and ensure that, after you have paid for all of your essential living expenses, there is enough left over from your income for you to be able to afford an acceptable Debt Agreement repayment.

If you are considering putting forward a Debt Agreement proposal, you will want to know beforehand that it is going to be sustainable and that your creditors are likely to accept it. Here at the Debt Agreement Advice Centre, we will not lodge a proposal on your behalf, or even start charging you set up fees, until we know that you are comfortable with the payments you are committing to and that it has a good chance of being accepted. Call us today on 1800 653 485 to discuss your financial position and find out whether you are able to propose a Debt Agreement to your creditors.