A Debt Agreement is an arrangement which you enter into with your creditors to settle your unsecured debts (typically for less than what we owe). A Debt Agreement will provide protection to your assets (assuming you make the agreed payments). This protection means that creditors cannot seize your assets or force you into bankruptcy whilst you comply with the terms of the Debt Agreement. If you comply with all of the agreed terms of the Debt Agreement you will then become released from all of the unsecured debts which were outstanding at the time you entered into it. In other words once you successfully complete the Debt Agreement you become debt free.
Once a Debt Agreement has been accepted by the majority of your creditors (measured in value of all debts) it will become legally binding on all creditors. This can be very useful particularly if you have tried an informal arrangement but couldn’t get one creditor to agree. This problem won’t happen in a Debt Agreement if the dissenting creditor holds less than the majority of all debts (in other words the dissenting creditor holds less than 50% of all debts).
How does it work?
Typically a Debt Agreement involves a series of regular payments to your creditors over the course of several years. Most Debt Agreements run for between 3 to 5 years, but in some cases that could be more or less. Debt Agreements are very flexible and it is possible to structure one differently. For example if you have secured debt arrears (i.e. home loan arrears) then you could ask for delayed repayments into your Debt Agreement whilst you bring your secured debts up to date. Another possibility could be to offer a lump sum payment from the sale of some assets or some money from a family member.
If the Debt Agreement is to be based on a series of regular payments then they will be based on what you can afford to repay. We will help you work out what is affordable but it will be based on a household budget (you’re your income less necessary household expenses).
If you want advice on a Debt Agreement call our friendly and professional debt consultants on 1800 653 485
